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					                                                                       DoD 5105.38-M, October 3, 2003



                                        C11. CHAPTER 11

                           SPECIAL PROGRAMS AND SERVICES
C11.1. ACQUISITION AND CROSS-SERVICING AGREEMENTS (ACSAS)
ACSAs are Department of Defense (DoD) agreements negotiated on a bilateral basis with
nations designated by the Secretary of Defense as ACSA-eligible. To be designated as ACSA-
eligible, a country must either be a member of the North Atlantic Treaty Organization (NATO)
or have a defense alliance with the United States (U.S.); permit stationing of U.S. troops; allow
pre-positioning of U.S. assets; or host U.S. Forces’ exercises. Support is generally provided on a
reciprocal basis. Payments may be made in cash, replacement in kind or equal value exchange –
countries pay the DoD rate (not the Foreign Military Sales (FMS) rate). Except for
contingencies, humanitarian, and foreign disaster efforts, annual (fiscal year) ceilings apply. 10
U.S.C. 2341-2350 (reference (ce)) authorizes the use of ACSAs. DoD Directive 2010.9
(reference (cf)) contains the policy for these agreements. The Chairman of the Joint Chiefs of
Staff has primary responsibility for these agreements
   C11.1.1. Standard Provision of Logistics Support, Supplies, and Services Under an ACSA.
        C11.1.1.1. What MAY Be Provided Under an ACSA? ACSAs permit the United States
to provide logistics support, supplies, and services to include food, billeting, transportation
(including airlift), petroleum, oils, lubricants, clothing, communication services, medical
services, ammunition, base operations support (and construction incident to base operations
support), storage services, use of facilities, training services, spare parts and component, repair
and maintenance services, calibration services, and port services. Also permitted are the
temporary use of general purpose vehicles and other non-lethal items of military equipment that
are not designated as significant military equipment (SME) on the U.S. Munitions List in the
International Traffic in Arms Regulations (ITAR) (reference (n)).
        C11.1.1.2. What MAY NOT Be Provided Under an ACSA? ACSAs do not permit
transfer of weapons systems; initial quantities of replacement and spare parts for major end items
of equipment covered by tables of organization and equipment, tables of allowances and
distribution, or equivalent documents; major end items of equipment; guided missiles; naval
mines and torpedoes; nuclear ammunition and included items such as warheads, warhead
sections, and projectiles; guidance kits for bombs or other ammunition; and chemical
ammunition (other than riot control).




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    C11.1.2. Temporary Authority to Use ACSA to Lend Certain Military Equipment to Foreign
Forces in Iraq and Afghanistan for Personnel Protection and Survivability or Participating in
Combined Operations with the United States as part of a Peacekeeping Operation under the
Charter of the United Nations or Another International Agreement. Notwithstanding paragraph
C11.1.1 above, special authority was enacted in Section 1202 of the National Defense
Authorization Act (NDAA) for Fiscal Year 2007 (P.L. 109-364) , as amended by Section 1252 of
the FY 2008 NDAA, to permit the Secretary of Defense to treat “covered military equipment”
(defined in Section 1202 as SME in USML categories I, II, III, VII, XI, and XIII) as logistics
support, supplies, and services under ACSA agreements for the purposes of providing such
equipment to military forces of a nation while participating in combined operations with the
United States in Iraq or Afghanistan, or in other approved combined operations, when the
equipment is required for personnel protection or to aid in the personnel survivability of those
forces. Use of this authority requires a determination by the Secretary of Defense, with
concurrence of the Secretary of State that it is in the national security interest to provide the
equipment. Equipment may not be provided for a period longer than one year. This authority
expires on September 30, 2009.
   C11.1.3. ACSA Process
        C11.1.3.1. Eligibility. The Combatant Commander forwards a request to the Joint Staff,
J4, to have a foreign country designated as ACSA-eligible. The request is staffed, forwarded to
the Office of the Secretary of Defense (OSD), and sent to the Department of State (DoS) for
coordination. When approved by all parties, there is a 30-day Congressional Notification period
before negotiations begin. If Congress takes no action, the nation is eligible and the Combatant
Commander is notified that negotiations may commence.
        C11.1.3.2. Negotiations. A team from the Combatant Commander meets with the
eligible nation to reach an agreement on the exact wording of the ACSA. The Department of
Defense and DoS have developed an approved ACSA template.
       C11.1.3.3. Conclusion. The negotiated ACSA is forwarded from the Combatant
Commander to the Joint Staff, J4, for staffing. It is then coordinated with OSD and sent to the
DoS requesting authority to conclude the agreement. If the language of the ACSA template is
agreed to by the foreign nation, there is an expedited approval process. Once authority is
granted, the Combatant Commander is notified that the ACSA may be signed.
        C11.1.3.4. Execution. In order to execute the ACSA, an Implementing Arrangement
must outline the billing procedures and identify points of contact. The ACSA template includes
the Implementing Arrangement language, so there is no need to negotiate a separate
arrangement. An Order or Support Request must be processed for each ACSA transaction to
financially bind the acquiring nations.




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C11.2. C-12 AIRCRAFT MANAGEMENT
The Defense Security Cooperation Agency (DSCA), Defense Intelligence Agency (DIA), and
U.S. Air Force (USAF) Memorandum of Understanding (MOU), dated August 6, 1996, provides
four C-12 aircraft to DSCA for use in implementing Security Assistance. In consultation with
the appropriate Combatant Command, DSCA assigns the C-12s to overseas Security Cooperation
Organizations (SCOs) on a priority basis. The Combatant Commands provide additional
guidance to SCOs on C-12 program management.
   C11.2.1. C-12 Aircraft Missions
        C11.2.1.1. Security Assistance C-12 Aircraft Missions. The primary mission of the
DSCA dedicated C-12 aircraft is to support SCO Security Assistance program management as
outlined in Foreign Assistance Act (FAA), section 515 (reference (b)). Included in this category
are local in-country training, evaluation, and maintenance flights. These missions are financed
by Security Assistance Administrative funds.
        C11.2.1.2. Non-Security Assistance C-12 Aircraft Missions. Other missions may be
flown only when they do not impair Security Assistance missions, when they are reimbursed,
and only when in compliance with the laws and regulations governing the use of DoD
transportation assets. Examples include: disaster relief, Combatant Command exercises, visitors
who are on non-Security Assistance management business, flights flown in support of the U.S.
Embassy, U.S. Defense Representative responsibilities, or flights flown in support of an FMS
case which specifically includes a transportation line. C-12 flights that support Congressional or
Congressional Staff Delegations (CODELs) are also included in this category. DSCA Form 78-
001 (Figure C11.F1.) should be completed and submitted with a certified statement of actual
flying time to DSCA (Business Operations Directorate) within 2 workdays after the airlift has
been completed.
   C11.2.2. C-12 Aircraft Policies. The policies in Table C11.T1. govern the use of the DSCA
C-12 aircraft.
    C11.2.3. Flight Approval Authority for DSCA C-12 Aircraft. The SCO Chief has approval
authority for flights within his or her area of accreditation in support of Security Assistance
management functions. The SCO Chief retains responsibility for the proper use of the C-12
regardless of the agency using or funding the use of the C-12. For DIA dedicated C-12 aircraft,
jointly used by the SCO, the SCO Chief retains responsibility for proper C-12 uses for SCO
missions. For other non-Security Assistance missions, established Combatant Command
approval procedures are followed and fund cites obtained prior to flight.




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               Figure C11.F1. DSCA Form 78-001, Request for Revenue Traffic Airlift

                                  DEFENSE SECURITY COOPERATION AGENCY
                                            Washington, D.C. 20301


                                    REQUEST FOR REVENUE TRAFFIC AIRLIFT
Date:
Request No:
From: __________________________
To:     Chief SCO

Revenue traffic airlift services as described are requested for the following activity:

Purpose, date, estimated flying times, and route of non-Security Assistance flight mission:

Billing address:

Fund citation to be shown on billing:

CERTIFICATION BY REQUESTING OFFICIAL: Pursuant to requirements of DoD Regulation 4515.13-R
(subparagraph C8.2.2.1.), I certify that commercial transportation is neither available, readily obtainable, nor
satisfactorily capable of meeting the requirements. I certify that the requesting office will accept liability for the
reimbursement billing for airlift service provided in response to this request.



                                                                 Signature_____________________
                                                              [Name and Title of Requesting Official]



For use by Chief SCO:
      Signature________________________
[Name and Title of SCO Approving Official]

                                 Table C11.T1. DSCA C-12 Aircraft Policies
                                             DSCA C-12 Aircraft Policies
                   When SCOs share or jointly use C-12 aircraft, Security Assistance missions take precedence over
      1
                   any other SCO requirements.
                   All C-12 missions flown out of the SCO area of accreditation require prior justification to, and
      2
                   approval by, the Combatant Command.
                   The C-12 aircraft shall be used only when such use is more economical then commercial aircraft or
                   airline services are not available, readily obtainable, or for reasons which must be specified,
      3            incapable of satisfying the transportation requirements. The C-12 should not be used if travel
                   requirements can be met with other safe, more cost effective modes of transportation e.g., rail,
                   automobile, etc. The SCO Chief has the authority to make these decisions.
                   Passenger travel and reimbursement shall be in accordance with DoD 4515.13-R (reference (cg)) or
      4
                   by specific Combatant Command approval before flight, except in case of emergency.



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    C11.2.4. Passenger Approval and Eligibility for DSCA C-12 Aircraft. Passenger eligibility
for all DoD aircraft is set out in DoD 4515.13-R (reference (cg)). Normal categories of military
travel are permitted to include temporary duty and space-available travel of military members
and dependents, provided that such travel does not interfere with the primary Security Assistance
mission. Special categories of passengers may be eligible for C-12 travel if approved by the
appropriate authority as set out in DoD 4515.13-R (reference (cg)). DSCA dedicated C-12
missions may not be scheduled solely for rest and recuperation purposes. The SCO Chief is
responsible to determine if movement of travelers interferes with the Security Assistance mission
and is therefore the final authority for passenger movement. This includes authorization of
Security Assistance travel as well as determination that non-Security Assistance travel does not
interfere with the Security Assistance mission. The SCO may also approve space-available
travel. In addition, the SCO Chief has special authority as outlined in DoD 4515.13-R (reference
(cg)), section C10.9., for specified American Embassy personnel, distinguished foreign nationals,
key foreign military, and spouses of certain officials under certain conditions as indicated in
Table C11.T2.
                   Table C11.T2. Passenger Eligibility for DSCA C-12 Aircraft
        Passenger Type                                  Eligibility for DSCA C-12 Aircraft
  Spouses of DoD personnel,       Due to unique funding of DSCA C-12 operations, these procedures may differ
  other than authorized by DoD    from other DoD aircraft transportation requirements. The spouse travel must
  4515.13-R, section C10.9.,      clearly be in the national interest and there must be an unquestionable official
  must have Invitational Travel   requirement in which the spouse is to participate.
  Orders (ITOs).
                                  CODELs warrant special consideration. The Assistant Secretary of Defense for
                                  Legislative Affairs (ASD(LA)) has approval authority for non-sponsored, non-
                                  reimbursable flights in support of CODELs. In addition, sponsored, non-
                                  reimbursable CODEL flights outside of the United States must be submitted to
                                  the Secretary of Defense (DoD Directive 4515.12 (reference (ch))). In the
                                  process of determining the availability of DSCA dedicated C-12 aircraft to
                                  support a CODEL mission, the DSCA verifies to ASD/LA that the aircraft does
                                  not have a higher priority Security Assistance requirement. The DSCA requests
                                  the appropriate Combatant Command to obtain C-12 availability from the SCO.
                                  Once a decision has been made to use the DSCA dedicated C-12, the Military
  Congressional Delegations       Department (MILDEP) (which has been assigned by ASD(LA) to support the
  (CODELs)                        CODEL) should immediately provide the SCO, the Combatant Command, and
                                  DSCA (Business Operations Directorate) with a fund cite to support the
                                  missions, as well as list of names of official members of the CODEL, identified
                                  by the Chairman of the Committee which is sponsoring the CODEL, to ensure
                                  that all concerned clearly understand who are the authorized passengers.
                                  Pursuant to 10 U.S.C. 2341-2350 (reference (ce), and the rules promulgated
                                  there under; such as DoD Directive 4515.12 (reference (ch)), official members
                                  of CODELs may be authorized passengers on DSCA dedicated C-12 aircraft.
                                  On short notice requests, SCOs should telephone DSCA (Business Operations
                                  Directorate) to resolve questions on CODEL travel. SCOs keep the Combatant
                                  Command and DSCA (Business Operations Directorate) informed.




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    C11.2.5. Reimbursement for C-12 Aircraft Flights. The reimbursement requirement for
passenger travel is addressed in DoD 4515.13-R (reference (cg)). If the passenger is on official
duty in support of SCO management functions, he or she is authorized travel and no
reimbursement is required. Approval authority for space-available, non-reimbursable travel for
designated individuals is granted to SCO Chiefs by DoD 4515.13-R, section C10.9. (reference
(cg)). Embassy requests for permission to transport non-DoD individuals (outside the authority
of DoD 4515.13-R (reference (cg))) shall be in accordance with DoS Foreign Affairs Manual,
Volume 6, Section 129.5 (reference (ci)), as amended, to ensure proper inter-agency
coordination. All other passengers must fall under the purview of DoD 4515.13-R (reference
(cg)) as non-reimbursable, or they must reimburse DSCA for their travel. While some CODEL
missions may be considered by DSCA and SCOs to be Security Assistance missions, there is no
authority for the use of Security Assistance administrative funds to support non-Security
Assistance CODEL missions on DSCA dedicated C-12 aircraft. CODEL mission funding is the
responsibility of the MILDEP tasked by ASD(LA) to support the CODEL. The cost for the
CODEL mission is reported by the SCO via DSCA Form 78-001 (Figure C11.F1.) to DSCA
(Business Operations Directorate) for reimbursement action. For reimbursable travel, there is no
seat mile rate for DSCA dedicated C 12 aircraft. Flying hour rates shall be used. Questions may
be directed to DSCA (Business Operations Directorate).
    C11.2.6. DSCA C-12 Aircraft Program Management Responsibilities. Table C11.T3. shows
the C-12 Aircraft program management responsibilities for the SCO, the Combatant Command,
and DSCA (Business Operations Directorate).




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          Table C11.T3. DSCA C-12 Aircraft Program Management Responsibilities
                       DSCA C-12 Aircraft Program Management Responsibilities
               Provide to the Combatant Command the flying hour programs for the yearly budget in
               accordance with criteria established by this manual and DSCA (Business Operations Directorate)
               annual budget call.
               Provide to the Combatant Command copies of all Memoranda of Understanding (MOUs)
               between the SCO and other organizations where a shared or joint use agreement is in effect.
               Submit monthly activity reports to the C-12 Program Manager in accordance with the Oklahoma
               Air Logistics Center (OC-ALC/LKO), Oklahoma City, Oklahoma, and DSCA C-12 Support
               Agreement T-607, Attachment 3, January 1991.
               Complete DSCA Form 78-001, “Request for Revenue Traffic Aircraft”, and a memorandum
               certifying actual flying time, for each reimbursable flight and mail these forms to DSCA
SCO            (Business Operations Directorate), 201 12th Street South, Suite 203, Arlington VA 22202, as
               soon as practical (not later than 10 working days after the date of the flight).
               Keep the appropriate Combatant Command and DSCA (Business Operations Directorate)
               informed on all CODEL missions, as appropriate.
               Provide to the Combatant Command information pertaining to changes in overall flying hour
               program requirements as soon as possible. Changes to flying hour programs, or movement of
               aircraft, can require a lead-time of six months to become effective.
               The SCO Chief ensures that the SCO complies with this section as well as guidance that may be
               provided by the Combatant Command. Questions regarding this section should be directed to
               DSCA (Business Operations Directorate) through the appropriate Combatant Command C-12
               Point of Contact.
               Review and forward recommended flying hour requirements.
               Administrative oversight of DSCA dedicated C-12 aircraft in their area of accreditation
               consistent with applicable guidelines and directives to ensure safe and efficient use of these
               resources.
Combatant      Keep the Director, DSCA informed of problems or issues resulting from reviews of SCO
Command        monthly reports, or other sources, to include corrective action(s) underway.
               Assist SCOs in obtaining fund cites for non-Security Assistance missions, as necessary, prior to
               the mission.
               Maintain copies of all MOUs between SCOs and other organizations for joint or shared use of
               DSCA dedicated C-12 aircraft.
               Responsible for the DIA/DSCA/USAF C-12 MOU. Provides policy and program guidance on
               management of DSCA dedicated C-12 aircraft.
DSCA           Obtains funding and establishes approved flying hour budgets for SCOs; processes DSCA Form
(Business      78-001 submitted by SCOs; and administers reimbursement to the USAF for the total cost of the
Operations     SCO flying hour program to include the maintenance contract costs, engine overhaul, and fuel.
Directorate)   Establishes annual flying hour program reporting requirements, provides annual flying hour
               requirements to the C-12 Program Manager at Oklahoma City Air Logistics Center, and Internal
               Management Control (ICM) reporting on the C-12 aircraft to higher authority.




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C11.3. COUNTER-NARCOTICS ASSISTANCE-NATIONAL DEFENSE AUTHORIZATION
ACTS, SECTIONS 1004 AND 1033
    C11.3.1. Counter-Narcotics Assistance Legal Provisions. Under Section 1004 of Public Law
101-510 (reference (bq)) (the National Defense Authorization Act for Fiscal Year 1991) and
Section 1033 of Public Law 105-85 (reference (cj)) (the National Defense Authorization Act for
Fiscal Year 1998), the Office of the Assistant Secretary of Defense for Special Operations and
Low Intensity Conflict - Counter-Narcotics (OASD(SOLIC-CN)) is authorized to obtain defense
articles and services via direct arrangements with the MILDEPs or other DoD agencies. Table
C11.T4. lists the types of support authorized under these sections.
          Table C11.T4. Types of Support Authorized by Section 1004 and Section 1033
                 Section 1004                                                  Section 1033
    Support for Counter-Narcotics Purposes                       Authority restricted to Counter-Narcotics
                                                                     Support to Columbia and Peru
(1) Maintenance, repair and upgrade of loaned DoD
                                                             (1) Riverine patrol boats.
equipment.
(2) Maintenance, repair and upgrade of other                 (2) Non-lethal protective and utility personnel
equipment.                                                   equipment.
                                                             (3) Non-lethal specialized equipment such as night
(3) Transportation of personnel, including personnel
                                                             vision systems, navigation, communications, photo,
of foreign countries, supplies, and equipment.
                                                             and radar equipment.
                                                             (4) Non-lethal components, accessories,
(4) Establishment (included unspecified minor
                                                             attachments, parts, hardware, and software for
military construction projects) and operation of
                                                             aircraft or patrol boats, and related repair
bases of operations or training facilities.
                                                             equipment.
(5) Counter-Drug related training of law
enforcement personnel of the Federal, State, and
local Governments and of foreign countries,                  (5) Maintenance and repair of equipment that is
including associated support expenses for trainees           used for counter-drug activities.
and the provision of materiel necessary to carry out
such training.
(6) Detection, Monitoring and Communication.
(7) Construction of Roads, Fences and Installation
of Lighting.
(8) Establishment of Command, Control and
Computer Networks.
(9) Provision of Linguists and Intelligence Analysis
Services.
(10) Aerial and Ground Reconnaissance.

    C11.3.2. Requests for Section 1004 or 1033 Agreements. OASD(SOLIC-CN) may request
defense articles and services from DSCA using the existing FMS infrastructure. OASD(SOLIC-
CN) submits a written request (Figure C11.F2.) to the DSCA (Operations Directorate) for the
desired items and services and the Director, DSCA, signs the document signifying acceptance.
The written request, the DSCA acceptance, and the provision of funding authority to DSCA
serve as the framework for the DoD FMS community to provide support.


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              Figure C11.F2. Section 1004 or 1033 Request From OASD(SO/LIC-CN)

                       National Defense Authorization Acts, Sections 1004 or 1033 Request
Pursuant to Section 1004 of the National Defense Authorization Act for Fiscal Year 1991 (Public Law 101-510)
and/or Section 1033 of the National Defense Authorization Act for Fiscal Year 1998 (Public Law 105-85),
OASD(SO/LIC-CN) requests DSCA to procure the following defense articles or services in accordance with the
terms and conditions set out below.
1. Description of the defense article or service (general description of the article or service including the scope of
work and schedule):
2. Funding arrangements:
    a.   Funds will be transferred by the Undersecretary of Defense (Comptroller) (USD(C)) to DSCA’s
         appropriated account by [insert date].
    b.   Fiscal Year, type and expiration date of funds:____________________
    c.   In the amount of: [insert the dollar amount]
    d.   Time Period: Funds must be obligated on or before [insert date] . DSCA shall direct the Implementing
         Agency to execute a Pseudo Letter of Offer and Acceptance no later than: [insert date]_ to ensure that
         funds are obligated by the date specified above. If the Implementing Agency fails to execute the case in
         whole or in part by this date, DSCA shall return unobligated funds to USD(C).
(DSCA will issue a Military Interdepartmental Purchase Request (MIPR) providing funds to the FMS Trust Fund.)
3. OASD(SOLIC-CN) is responsible for payment of all costs arising out of or related to this agreement, including
but not limited to cost increases, claims, and termination costs.
4. Delivery Terms: [insert the name of the representative of a U.S. agency designated by OASD(SO/LIC-CN)] will
take delivery and provide a written record of receipt to the Implementing Agency. OASD(SO/LIC-CN) assumes
responsibility for the security, accountability, and tracking of items and services provided.
5. 5. Administrative Surcharge: DSCA will assess an administrative surcharge of 3.8 percent on all items and
services provided pursuant to this request.
6. Reporting: DSCA in conjunction with the Implementing Agency and the Defense Finance and Accounting
Service shall keep complete funding records/accounts on OASD(SO/LIC-CN) provided funds. DSCA shall provide
OASD(SO/LIC-CN) quarterly reports of program activities, as well as additional information or documentation that
OASD(SO/LIC-CN) may request, including accounting or audit records for OASD(SO/LIC-CN) funds. Each
submission shall refer to this document.
7. At the conclusion of this arrangement, DSCA shall report to OASD(SO/LIC-CN) that the funds were obligated
and expended for the authorized purposes and return unexpended funds to OASD(SO/LIC-CN).
8. DSCA shall submit reports required by this arrangement to [insert address].
9. Other Terms and Conditions: OASD(SO/LIC-CN) may submit this request by memo, fax, email, or any
electronic format that contains an authorized form of electronic signature.
10. Point of Contact/Procedures for Coordination with OASD(SO/LIC-CN): [Insert name, phone number, fax
number and e-mail address].


 Requesting Agency’s Representative:       ___________________________
 (OASD(SO/LIC-CN))                         ___________________________(insert date)
 Accepting Agency’s Representative:        ___________________________
 (Director, DSCA)                          ___________________________(insert date)




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    C11.3.3. Section 1004 or 1033 Pseudo Letters of Offer and Acceptance (LOAs). A Pseudo
LOA is used by the United States Government (USG) to track the sale of defense articles and/or
services (to include training, and design and construction services) to OASD(SOLIC-CN) under
the authority of Sections 1004 and 1033. The Pseudo LOA itemizes the defense articles and/or
services included in OASD(SOLIC-CN) request. It is NOT signed by the country and/or
organization receiving the articles and/or services. The request, acceptance, and funding of
Section 1004 or 1033 Pseudo LOAs is via the written request (Figure C11.F2.) and associated
Military Interdepartmental Purchase Request (MIPR) issued by DSCA (Business Operations
Directorate) or the Implementing Agencies. DSCA (Operations Directorate) provides a copy of
the written request to the Implementing Agency with the memorandum requesting the
Implementing Agency prepare the Pseudo LOA.
        C11.3.3.1. Section 1004 or 1033 Pseudo LOA Preparation Timeframe. Pseudo LOAs are
categorized as “Group D” and will be processed according to the guidelines provided in Chapter
5, paragraph C5.4.2.
       C11.3.3.2. Section 1004 or 1033 Pseudo LOA Preparation Process. The Implementing
Agency develops a Section 1004 or 1033 Pseudo LOA in the Defense Security Assistance
Management System (DSAMS) to allow program execution through existing security assistance
automated systems. Pseudo LOAs follow the same LOA preparation guidelines as FMS cases.
(See Chapter 5, paragraph C5.4.6.).
       C11.3.3.3. Section 1004 or 1033 Pseudo LOA Format. Pseudo LOAs follow LOA
format guidance for FMS cases (see Chapter 5, Figure C5.F5.) except as identified in Figure
C11.F3.
      Figure C11.F3. Unique Instructions for Preparing Section 1004 or 1033 Pseudo LOAs
               Unique Instructions for Preparing a Pseudo Letter of Offer and Acceptance for
                                     Section 1004 or Section 1033 Cases
1. Case Identifier.
    a. For Section 1004 Pseudo LOAs, the case identifier is composed of country code “S8” (Section 1004
    Transactions), Implementing Agency code of the DoD Component providing support, and a case designator
    assigned by DSCA (Strategy Directorate).
    b. For Section 1033 Pseudo LOAs, the case identifier is composed of country code “S7” (Section 1033
    Transactions), Implementing Agency code of the DoD Component providing support, and a case designator
    assigned by DSCA (Strategy Directorate).
2. Nickname Field. The country/organization receiving the support and the type of support (e.g., Section 1004, or
Section 1033) is identified in the “nickname” field on the Pseudo LOA.
3. Purchaser’s Reference. The written request between OASD(SOLIC-CN) and DSCA is entered in the “Based
on” field.
4. Terms of Sale. The Term of Sale for all Section 1004/1033 Pseudo LOAs is Cash with Acceptance.

        C11.3.3.4. Pricing Section 1004 or 1033 Pseudo LOAs. Pricing of articles and services
for Section 1004 or 1033 Pseudo LOAs is in accordance with DoD 7000.14-R (reference (o)),
Volume 11A, Chapter 1 as outlined below.




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           C11.3.3.4.1. Pricing Section 1004 or 1033 Pseudo LOAs – Non-DoD Working
Capital Funded (DWCF) Materiel. Non-DWCF assets are transferred under this authority at no
charge. These transfers are considered to be to another DoD Component and are made on a non-
reimbursable basis.
            C11.3.3.4.2. Pricing Section 1004 or 1033 Pseudo LOAs – Contracts. Full contract
costs incurred for awarded contracts are charged to the Section 1004 or 1033 Pseudo LOA.
         C11.3.3.4.3. Pricing Section 1004 or 1033 Pseudo LOAs – DWCF Items.
Reimbursement is made at the DWCF standard price. The reimbursement is credited to the
DWCF.
             C11.3.3.4.4. Pricing Section 1004 or 1033 Pseudo LOAs – Services. Reimbursement
is for the additional cost incurred by the Department of Defense to provide such services.
Civilian pay and funded benefits are included in additional costs but unfunded civilian retirement
and benefits and military pay are not included. The reimbursement is credited to the applicable
appropriation incurring the cost.
            C11.3.3.4.5. Pricing Section 1004 or 1033 Pseudo LOAs – Surcharges and
Accessorials. FMS surcharges and accessorial rates apply. DoD FMS resources support this
effort and are reimbursed through the normal FMS surcharge and accessorial accounts. Any
request to deviate from the application of these surcharges must be sent to DSCA (Business
Operations Directorate) for approval.
        C11.3.3.5. Additional Section 1004 or 1033 Pseudo LOA Information. The LOA
Standard Terms and Conditions DO NOT apply to Section 1004 or 1033 Pseudo LOAs. Other
notes that are mandatory for FMS cases (e.g., Offsets, Unauthorized Use of Defense Articles)
DO NOT apply to Section 1004 or 1033 Pseudo LOAs. Notes regarding inclusion of charges on
the document (e.g., Administrative Surcharge and Contract Administrative Surcharge notes) DO
apply to these Pseudo LOAs. Unique notes should be included on each Pseudo LOA to ensure
readers can understand the program. In addition to these customized notes, there are mandatory
standard notes that must be included on each Pseudo LOA: Authority for Sale – Section 1004 or
1033 of the cited National Defense Authorizations Acts; Limit of Support under Section 1004 or
1033 authorities; and Funds Availability, Purpose, and Expiration. See Chapter 5, Table C5.T5.
for wording of these notes.
       C11.3.3.6. DSCA Coordination and Countersignature of Section 1004 or 1033 Pseudo
LOAs. All Section 1004 or 1033 Pseudo LOA documents require DSCA countersignature (see
Chapter 5, paragraph C5.4.14.). The Implementing Agency posts the country acceptance
milestone in DSAMS after DSCA countersignature.




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    C11.3.4. Transfer of Funds for Section 1004 or 1033 Activities. OASD(SOLIC-CN)
processes all Section 1004 or 1033 Congressional Notifications and provides copies of the
notifications to DSCA (Operations Directorate) along with certification that notification
requirements have been met. USD(C) then transfers funds from the DoD Counter-Drug Central
Transfer Account to the DSCA (Business Operations Directorate) appropriated account. DSCA
(Business Operations Directorate) issues a MIPR to transfer the funds into the FMS Trust Fund
only upon notification from OASD(SOLIC-CN) that the Congressional Notification has been
completed. The DSCA (Business Operations Directorate) sends a copy of the accepted MIPR to
the Defense Finance and Accounting Service (DFAS) Indianapolis along with instructions to
collect the funds and establish a separate holding account associated with the Section 1004 or
1033 Pseudo LOA. DSCA monitors the obligation of funds by the date set in the written request,
directs the return of unobligated funds not required for the provision of items or services, and
notifies OASD(SOLIC-CN) of potential cost increases or decreases.
    C11.3.5. Section 1004 or 1033 Pseudo LOA Reporting. The DSCA 1200 system is NOT
used to record Section 1004 and 1033 Pseudo LOAs. The Defense Integrated Financial System
(DIFS) distinguishes Section 1004 and 1033 agreements from other FMS agreements using the
Pseudo LOA case identifier. The Implementing Agency does delivery reporting for these cases.
DFAS Indianapolis applies surcharges and accessorial charges to the DoD delivery transactions,
as done for FMS transactions. DSCA in conjunction with the Implementing Agency and DFAS
Indianapolis provides the OASD(SOLIC-CN) with quarterly reports of program activities and
any additional information or documentation that OASD(SOLIC-CN) may request regarding
expenditures and activities. This includes any accounting or audit records concerning funds
transferred under this agreement.
   C11.3.6. Section 1004 or 1033 Pseudo LOA Billing. DFAS Indianapolis submits the
quarterly DD 645 bill or for these purposes a report of costs incurred, to DSCA (Business
Operations Directorate). Upon completion of the Section 1004 or 1033 Pseudo LOAs, the
DSCA (Business Operations Directorate) directs DFAS Indianapolis to return excess funds to
DSCA or other funding source. DSCA (Business Operations Directorate) returns unprogrammed
funds to the originating OASD(SOLIC-CN) account.




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C11.4. DRAWDOWNS
    C11.4.1. Definition and Purpose. The FAA (reference (b)) authorizes the President to direct
transfers of on-hand DoD-stock defense articles and services (as well as articles and services
from the inventory and resources of any agency of the USG) and military education and training
to foreign countries and international organizations in response to unforeseen military
emergencies, humanitarian catastrophes, peacekeeping needs, or counternarcotics requirements.
Except for transportation and related services where new contracts would cost less than
providing such services with DoD assets, no new procurement is authorized and no new funds
may be placed on existing contracts unless otherwise provided by law. Table C11.T5.
summarizes the legal references of the different types of drawdowns.
                             Table C11.T5. Drawdown Legislation Summary

          Legislation                                               Subject
                                DoD Drawdown for unforeseen emergencies:
                                Authorizes the President to direct DoD drawdowns for unforeseen emergencies
                                requiring immediate military assistance that cannot be addressed under the
                                AECA or any other law.
   FAA, Section 506(a)(1)
                                Only defense articles already on hand in DoD stocks, DoD services, and
   [22 U.S.C. 2318(a)(1)]       military education and training may be provided.
   (reference (b))
                                Congress must be notified before the President signs the Presidential
                                Determination (PD).
                                The aggregate value of all drawdowns directed in any fiscal year under FAA,
                                section 506(a)(1) (reference (b)) may not exceed $100M.
                                International narcotics control, international disaster assistance, antiterrorism
                                assistance, nonproliferation assistance, migration and refugee assistance,
                                Prisoner of War/Missing in Action (POW/MIA) efforts in Cambodia, Laos and
                                Vietnam:
                                Inventory and resources of any USG agency may be provided.
                                Congress must be notified before the President signs the PD for international
   FAA, Section 506(a)(2)       disaster relief and POW/MIA efforts in Vietnam, Cambodia, and Laos.
   [22 U.S.C. 2318(a)(2)]       Congress must be notified 15 days before the President signs the PD for
   (reference (b))              international narcotics control and efforts under the Migration and Refugee
                                Assistance Act of 1962.
                                The aggregate value of all drawdowns directed in any fiscal year under FAA,
                                section 506(a)(2) (reference (b)) may not exceed $200M of which:
                                No more than $75M may come from the Department of Defense.
                                No more than $75M may be used for international narcotics control.
                                No more than $15M may be used for POW/MIA drawdowns.
                                Peacekeeping Operations:
                                Authorizes drawdown if the President determines that an unforeseen
                                emergency requires the immediate provision of commodities and services of
                                any USG agency to countries and international organizations to support
   FAA, Section 552(c)(2)
                                peacekeeping operations.
   [22 U.S.C. 2348a(c)(2)]
                                Congress must be notified before the President signs the PD.
   (reference (b))
                                The aggregate value of drawdowns directed under FAA, section 552(c)(2)
                                (reference (b)) may not exceed $25M per fiscal year. United Nations support
                                may be limited to $3 million per fiscal year per operation; Public Law 106-
                                113, section 724 (22 U.S.C. 287b and 287c(2)) (reference (ck)).



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          Legislation                                            Subject
   FAA, Section 503
                             General authority to furnish Military Assistance under the FAA.
   (reference (b))
   FAA, Section 505
                             Conditions of eligibility for Military Assistance under the FAA.
   (reference (b))
   FAA, Section 652
                             Congressional Notification required before the President can direct drawdowns
   [22 U.S.C. 2411]          or exercise other specified special authorities under the FAA.
   reference (b)
   Public Law No. 106-113
   [22 U.S.C. 287b]
                             Support to the United Nations.
   [22 U.S.C. 287e(2)]
   (reference (ck))
                             Congress may create special legislation for specific programs or purposes.
                             There is no annual limit on the amount of special authorities that Congress
                             may authorize. Special authorities give the President the legislative authority
   Special Legislative
                             to provide assistance, but it is a Presidential decision whether to use that
   Authorities
                             authority. Legislation for special authorities may provide for broader
                             drawdown assistance, including authorization to contract for articles, services,
                             and education and training that are NOT on hand.
                             All drawdowns items transferred by ocean carriers must follow U.S. cargo
                             preference requirements. Recipient countries must use U.S. flag vessels unless
                             the Maritime Administration (MARAD) has issued a non-availability waiver.
                             MARAD assists in monitoring these statutes. The MILDEPs must consider
                             cargo preference requirements when considering transportations options for
   Cargo Preference Act of   drawdowns. The responsible office at MARAD is:
   1954 (reference (bd))                   U.S. Department of Transportation
                                           Maritime Administration
                                           Office of Cargo Preference
                                           400 Seventh St. SW
                                           Washington, DC 20590

    C11.4.2. Who Is Eligible to Receive a Drawdown? Defense articles and/or services may be
drawndown and transferred to a foreign country only if the President issues a PD in accordance
with the FAA. FAA, section 503 (reference (b)) eligibility determination must be completed and
the FAA, section 505 (reference (b)) assurances must be signed by the proposed recipient before
the drawdown can be executed.
   C11.4.3. Types of Drawdowns




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        C11.4.3.1. Emergency Drawdowns. Drawdowns are usually precipitated by an
emergency in a foreign country or region. In emergency drawdowns, the Department of
Defense, DoS, and the National Security Council (NSC) coordinate the USG response. This
interagency process determines which existing statutory authority applies and identifies which
articles and services should be provided. Potential contributing agencies (e.g. Department of
Defense, Department of Treasury, Department of Justice, etc.) and the military services furnish
valuation and availability (V&A) data to the DoS indicating the estimated value of the articles
and services proposed for the drawdown. The V&A data and the scope of support form the basis
for the PD that authorizes a specific maximum dollar value authority for the drawdown.
Emergency drawdowns may begin execution within 24-48 hours, but more commonly within 1-2
weeks.
        C11.4.3.2. Non-Emergency Drawdowns. Drawdowns may be authorized in non-
emergency situations to support mid- to long-term foreign policy initiatives. Non-emergency
drawdown procedures are similar to emergency drawdown procedures. In non-emergency
situations, the PD provides the value of the drawdown that cannot exceed the existing or special
legislative authority. The time-line to determine requirements is often 1 to 6 months before an
Execute Order is issued. Delivery of articles and services may take an extended period of time.
Non-emergency drawdowns end when the PD authority has been exhausted.
   C11.4.4. Types of Articles, Services, and Training Provided Under Drawdowns
        C11.4.4.1. Articles and Services. Equipment must be physically on hand (excess or non-
excess). Except for transportation, no new contracts (including placing orders against existing
contracts) are authorized without special legislative authority. Equipment, spares, and other
items must already be in DoD stocks. DoD employees normally perform services under
drawdowns, but contractors may also provide services on a case-by-case basis as approved by
DSCA. Supplies or services under existing DoD contracts may be used for drawdown purposes
if the use is within the scope and funds that have been previously obligated. Inventory Control
Points (ICPs) must process requisitions with “Fill or Kill” advice codes (i.e., 2J, 31, 32 etc. as
appropriate). Where possible, complete support packages are provided for major end items to
include training for operation and maintenance of the major end item. Spare parts requisitions
are processed on a “Fill or Kill” basis. Unless otherwise authorized, materiel must be provided
in condition code “B,” or Full Mission Capable (FMC) condition, or -10/-20 standards or better.
MILDEPs cannot place a hold, reserve, or fence equipment or spares prior to the release of
DSCA’s Execute Order.
        C11.4.4.2. Transportation. New commercial contracts for transportation and related
services may be used if the cost is less than the cost to use USG assets. Normally, the MILDEP
providing the equipment must fund the transportation of that equipment to its final destination.
The MILDEP reimburses the U.S. Transportation Command (TRANSCOM) for air and/or sealift
of the equipment. Existing contracts or resources may be used for airlift and sealift if their scope
covers the proposed use (such as time-charter or multiple air mission agreements).
         C11.4.4.3. Defense Working Capital Fund (DWCF) Items. DWCF items may be used to
fulfill drawdown requirements. In accordance with USD(C) policy, the MILDEPs must
reimburse the DWCF for all materiel and services provided. These costs must be charged and
accounted for under the current year Operations and Maintenance (O&M) funds.


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        C11.4.4.4. Fuel. Fuel drawdowns are handled in the same way as DWCF materiel. The
Defense Energy Support Center (DESC), under the Defense Logistics Agency (DLA) manages
fuel contracts for all MILDEPs. As with any other commodity, MILDEPs can utilize O&M or
Working Capital Funds (WCF) obligational authority to fund, via MIPR, fuel drawdowns
supplied from DESC existing contracts. Use of this funding can impact both cash and
obligational authority for normal MILDEP operations, therefore such issues should be carefully
coordinated with the MILDEPs and reported to USD(C) for inclusion in subsequent MILDEP
budget requests. As with any other type of drawdown commodity, new contracts are not
permitted without special legislative authority. Therefore, the type of fuel available for
drawdowns is limited to those available through DESC’s existing bulk fuels contracts at the time
of drawdown. Special coordination is required for the transportation, delivery, storage and
distribution of fuel. A signed Memorandum of Understanding (MOU) between the receiving
nation and U.S. Embassy outlining the necessary details is preferable.
    C11.4.5. Value of Drawdowns. Due to the often-abbreviated timelines available to develop
V&A data for drawdowns, it is critical to ensure that projected values are as accurate as possible.
Close coordination between DSCA and the MILDEPs during drawdown execution is critical to
reconcile values as early as possible. Actual value of drawdowns is normally available 30-90
days after actual delivery of the equipment. The value of the drawdown does not include FMS
surcharges. Value of articles, services, and training is determined using the following guidance:
       C11.4.5.1. Value of Articles. The value of drawdown articles is calculated in accordance
with DoD 7000.14-R (reference (o)), Volume 15, Chapter 7.
        C11.4.5.2. Value of Training. The value of drawdown military education and training is
based on the additional costs that are incurred by the USG in providing the training (i.e., Foreign
Military Financing (FMF) Grant or incremental rate as specified in DoD 7000.14-R (reference
(o)), Volume 15, Chapter 7).
        C11.4.5.3. Value of Services. The value of services provided under drawdowns is based
on actual costs to the USG for providing the service. Funded civilian pay and travel and per
diem costs of military and civilian personnel performing an approved “tasked” support role that
is exclusively devoted to the drawdown effort may be included when computing the value of
drawdown services. Value does not include salaries of the members of the U.S. Armed Forces
and unfunded civilian retirement and other benefits.
    C11.4.6. Drawdown Process. Table C11.T6. summarizes the drawdown planning and
development process. Additional information may be found in the DSCA Action Officer (AO)
Handbook for Foreign Assistance Act (FAA) Drawdown of Defense Articles and Services at
http://www.dsca.mil/home/drawdowns.htm.
                                     Table C11.T6. Drawdown Process
 Steps                                                  Actions
 1       Crisis occurs or policy situation develops
 2       Interagency determines “Drawdown” is the preferred option
         Drawdown package is developed (DSCA has the DoD lead).
 3
         Interagency Staffing (Department of Defense, the DoS, the NSC, etc.).



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 Steps                                                  Actions
         Package considers requirements, costs, and execution plan.
         The DoS obtains FAA, section 505 (reference (b)) end-use agreements from proposed recipient country.
         The DoS considers human rights issues.
         The DoS develops a Congressional Notification package on the proposed drawdown.
         Internal DoD Processing
         The MILDEPs prepare V&A data based on interagency-proposed requirements.
         The MILDEPs review impact of the drawdown on operational readiness and O&M budgets.
         The DSCA coordinates readiness impacts with the Chairman of the Joint Chiefs of Staff.
         The DSCA refers questions regarding readiness impact to Secretary of Defense or the Deputy Secretary
         of Defense (if required).
         Impacts are balanced among MILDEPs as much as possible.
 4       Congressional Notification package is staffed and coordinated by the DoS.
 5       Congress is formally notified – 15 day notification.
         PD and memorandum of justification are prepared by the DoS and signed by the President after
         Congressional Notification is complete. During the interagency process to finalize a PD, the drawdown
         package is continually reviewed and updated. The interagency determines which articles/services should
 6
         be provided depending on availability (either physically available or with acceptable operational
         readiness impact). The final PD should reflect what the Department of Defense can provide and becomes
         the base reference for execution of the drawdown.
         The DSCA issues an Execute Order identifying the articles, services, and training to be provided under
         the drawdown. Before issuing the Execute Order, the DSCA must have:
         A signed PD,
 7
         DoS obtained FAA, section 503 (reference (b)) eligibility,
         DoS obtained FAA, section 505 (reference (b)) assurances,
         DoS assurance that human rights issues do not preclude delivery.
         The MILDEPs (or others as appropriate) receive the Execute Order and provide funding to the
 8       agency/organization responsible for executing the drawdown. The executing agency/organization
         provides the articles, services, and training to the recipient(s).
         The DSCA/OSD/Chairman of the Joint Chiefs of Staff/Combatant Command monitor the execution and
 9
         make adjustments (revised Execute Orders) as required.
         The DSCA and the MILDEPs reconcile the drawdown to ensure all cost elements are reported. The
 10
         Department of Defense cannot exceed the drawdown authority provided in the legislation and the PD.
         The MILDEPs submit delivery data on drawdowns to DSCA for entry into DSCA 1000 System
         drawdown tracking database. Tracking data includes: Item/Service, Quantity, Unit Cost (drawdown
 11      value), Equipment (Total Quantity Cost), Services/Repair, Training (if applicable), Spare Parts, Support
         Equipment, Packing, Crating and Handling (PC&H), Transport, and Total Item/Service Cost (sum of all
         other categories for each items). Salaries for civilian services should be separately identified.
 12      The DSCA provides formal reports to Congress on the articles, services, and training provided.

   C11.4.7. Congressional Reporting for Drawdowns. U.S. laws require several reports to
Congress on drawdowns. DSCA (Business Operations Directorate) prepares these reports.




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       C11.4.7.1. FAA, Section 506 Report. FAA, section 506 (reference (b)) requires the
Department of Defense (DSCA) to report to Congress details on all the defense articles, defense
services, and military education and training delivered to the recipient country or international
organization upon delivery or completion of such articles, services, or education and training.
The report must also include whether any savings were realized by utilizing commercial
transportation services rather than acquiring those services from USG transport assets.
        C11.4.7.2. FAA, Section 655 Report. FAA, section 655 (reference (b)) requires an
annual military assistance report. The report covers defense articles, defense services, and
military training and education furnished by grant under any authority of law (including
drawdowns), except under title V of the National Security Act of 1947.
        C11.4.7.3. Reporting for Drawdowns Under Special Authorities. For special drawdown
authorities, there may be additional reporting requirements authorized by legislation in any fiscal
year.
C11.5. EXCESS DEFENSE ARTICLES (EDA)
     C11.5.1. Definition and Purpose. Excess Defense Articles (EDA) are DoD and United States
Coast Guard (USCG)-owned defense articles no longer needed and declared excess by the U.S.
Armed Forces. This excess equipment is offered at reduced or no cost to eligible foreign
recipients on an "as is, where is" basis. The EDA program works best in assisting friends and
allies to augment current inventories of like items with a support structure already in place.
Table C11.T7. is a summary of the EDA program legal references.
                               Table C11.T7. EDA Legislation Summary
               Legislation                                              Subject
                                        Sales from stock, including the sale of defense articles that are excess
AECA, Section 21 (reference (c))
                                        to DoD stocks.
                                        Requires an annual report to Congress listing weapons systems that
AECA, Section 25(a) (reference (c))     are SME and numbers thereof, forecasted to be available for transfer
                                        as EDA during the next calendar year.
AECA, Section 47 (reference (c))
Security Assistance Act of 2000,        Pricing (value) of EDA.
Section 706 of Public Law 106-280
Security Assistance Act of 2000,
                                        EDA for Mongolia.
Section 707 of Public Law 106-280




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               Legislation                                                  Subject
                                            Use of Defense Articles and Services. Defense articles and defense
                                            services are furnished solely for the following purposes:
                                            - for internal security (including antiterrorism & nonproliferation)
                                            - for legitimate self-defense for preventing or hindering the
                                            proliferation of weapons of mass destruction and of the means of
                                            delivering such weapons
AECA, Section 4 (reference (c))and FAA,     - to permit participation in arrangements consistent with the Charter
Section 502 (reference (b))                 of the United Nations (UN)
                                            - to permit participation in collective measures requested by the UN to
                                            maintain/restore international peace and security
                                            - to assist foreign military forces in less developed friendly countries
                                            (or the voluntary efforts of personnel of the Armed Forces of the
                                            United States in such countries) to construct public works or engage
                                            in other activities helpful to the economic and social development of
                                            such friendly countries
                                            Conditions of eligibility, transfers, use and security of grant EDA
FAA, Section 505 (reference (b))
                                            transfers.
FAA, Section 516 (reference (b))            Authority, limitations, terms of grant EDA transfers.
                                            EDA transfers shall not adversely impact the U.S. national technology
FAA, Section 516(b)(1)(e) (reference (b))   and industrial base nor reduce the opportunities of U.S. industry to
                                            sell new or used equipment to the proposed country. The Director,
AECA, Section 21(k) (reference (c))         DSCA determines the impact to industry with input from the
                                            Department of Commerce (DoC).
FAA, Section 516(b)(2) (reference (b))      Grant transfers to Greece and Turkey (7:10 Ratio).
                                            Grant priority to NATO members, major non-NATO allies on the
FAA, Section 516(c)(2) (reference (b))
                                            south and southeastern flank of NATO, and to the Philippines.
                                            EDA recipients are responsible for Packaging, Crating, Handling and
                                            Transportation (PCH&T) costs, as well as refurbishment work and
                                            follow-on support. These services may be purchased from the
                                            Department of Defense through the FMS program. DoD funds may
                                            be expended for the transportation of grant EDA if it is in the U.S.
                                            national interest, the transportation is on a Space Available basis, the
                                            total weight of the transfer does not exceed 50,000 lbs., and the
                                            recipient country receives less than $10M in International Military
FAA, Section 516(e) (reference (b))
                                            Education and Training (IMET) or FMF in the fiscal year the
                                            transportation is provided. MILDEPs must request Space Available
                                            authorization with the EDA request. Requests must include the total
                                            weight, proposed method and route of Space Available, and
                                            timeframes or constraints. DSCA (Programs Directorate) seeks the
                                            required national interest determination (delegated to the Director,
                                            DSCA under Executive Order) and where appropriate approve Space
                                            Available transportation in the EDA transfer authorization message.
FAA, Section 516(f) (reference (b))         Congressional Notification
                                            The aggregate current market value of grant EDA may not exceed
                                            $425,000,000 in any fiscal year. This may exclude the value of naval
FAA, Section 516(g) (reference (b))
                                            vessel transfers depending on the authorization language. DSCA
                                            (Programs Directorate) assures the ceiling limit is not exceeded.
                                            Requirement to provide an annual report to Congress identifying the
FAA, Section 516(h) (reference (b))
                                            EDA offers and actual delivery for the preceding year.




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               Legislation                                                 Subject
FAA, Section 516(i) (reference (b))        USCG considered within the Department of Defense for EDA
                                           Limitation on assistance to countries in default on U.S. Loans in
                                           excess of six months. When this sanction is enacted, all grant EDA
FAA, Section 620(q) (reference (b))
                                           transactions for the affected country are put on hold until the sanction
                                           is lifted.
FAA, Section 620C (reference (b))          Eastern Mediterranean policy (re: Cyprus).
                                           The statutory definition of EDA excludes construction equipment
                                           (tractors, scrapers, loaders, graders, bulldozers, dump trucks,
FAA, Section 644(g) (reference (b))
                                           generators and compressors); therefore these items CANNOT be
                                           transferred under the EDA program.
                                           Fire fighting equipment (pumpers, fuel and water tankers, crash
                                           trucks, utility vans, rescue trucks, ambulances, hook and ladder units,
                                           and other miscellaneous fire fighting equipment) can be transferred
Federal Property and Administrative        only if the President declares an emergency or if no other Federal
Services Act of 1949 (reference (cl))      Agency, State Government, person or entity eligible to receive the
                                           items submits a request for these items to the Defense Reutilization
                                           and Marketing Service (DRMS). DRMS performs the appropriate
                                           screening.
                                           Congressional Notifications for EDA sales.
Foreign Operations, Export Financing and
Related Program Appropriations Act         Limitation on assistance to countries in default on U.S. Loans in
(enacted annually)                         excess of 1 year. When this sanction is enacted, all grant EDA
                                           transactions for the affected country are cancelled.
Foreign Relations Authorizations Acts      Authorizes the use of funds appropriated to the Department of
(enacted periodically)                     Defense to pay PCH&T for EDA transfers for certain countries
NATO Participation Act of 1994,
[Public Law No. 104-208], Section 606      Grant priority
and Section 609 (reference (cm))
                                           Requirements for transfer of excess UH-1 Huey and AH-1 Cobra
10 U.S.C. 2581 (reference (cn))
                                           helicopters to foreign countries.
                                           Transfer of naval vessels less than 20 years old or more than 3,000
                                           tons (light load displacement) requires enactment of authorizing
                                           legislation. The value of these transfers is not normally included in
10 U.S.C. 7307 (reference (co))
                                           the EDA ceiling limit (dependent upon current authorization
                                           language). This legislation prescribes the criteria and congressional
                                           oversight provisions for these transfers.
                                           All grant EDA items transferred by ocean carriers must follow U.S.
                                           cargo preference requirements. Recipient countries must use U.S.
                                           flag vessels unless the MARAD has issued a non-availability waiver.
                                           MARAD assists in monitoring these statutes. The MILDEPs must
                                           consider cargo preference requirements when drafting LOAs. The
Cargo Preference Act of 1954 (reference    responsible office at MARAD is:
(bd))                                                    U.S. Department of Transportation
                                                         Maritime Administration
                                                         Office of Cargo Preference
                                                         400 Seventh St. SW
                                                         Washington, DC 20590




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              Legislation                                            Subject
                                       Annual legislation may specify certain countries for which DoD funds
                                       for EDA PCH&T may be expended. Security Cooperation Officers
                                       (SCOs) and/or MILDEPs must request funding of such transfers.
                                       Requests should identify the proposed source of DoD funds and the
                                       estimated PCH&T cost. DSCA is required to notify Congress of the
                                       use of this authority and of the estimated funds to be spent for each
Annual Special Legislation for PCH&T
                                       transfer that meets congressional notification requirements under
                                       FAA, section 516(f) (reference (b)). Requests for such funding
                                       should accompany the EDA approval request. DSCA determines
                                       which transfers are funded based on budget constraints and priorities
                                       associated with the source of DoD funds. As these exceptions are
                                       authorized for a limited time period, they must be renewed.

   C11.5.2. Who Can Obtain EDA?
       C11.5.2.1. Eligibility for EDA Sales. All FMS eligible countries can purchase EDA.
(See Chapter 4, Table C4.T2.)
        C11.5.2.2. Eligibility for EDA Grants. To receive grant EDA, a country must be justified
to Congress. Grant EDA eligibility is justified to Congress via the annual Congressional Budget
Justification (CBJ) for Foreign Operations or by a separate DSCA letter to Congress for the
fiscal year in which the transfer is proposed. The DSCA letter is used only in exceptional
circumstances with DoS concurrence. Eligibility does not guarantee that all EDA offers are
made on a grant basis - each EDA transfer is considered on a case-by-case basis.
           C11.5.2.2.1. FAA, Section 505 Assurances for Grant EDA. Prior to receiving grant
EDA items, foreign countries and international organizations must sign blanket end-use, security,
and retransfer assurances. The text of these assurances is established by law and is not
negotiable. The DoS obtains these FAA, section 505 (reference (b)) assurances via diplomatic
notes. EDA offers are not authorized until the assurances are received.
            C11.5.2.2.2. Grant EDA Transfers to the Eastern Mediterranean – 7:10 Ratio. Grant
EDA transfers to the Eastern Mediterranean (Greece and Turkey) must meet FAA, section 620C
requirements for a just and lasting Cyprus settlement. Defense articles offered to either country
cannot be transferred to Cyprus or used to further the severance or division of Cyprus. The ratio
of grant EDA offered to Greece to grant EDA offered to Turkey over a 4-year period must be on
a 7 (Greece) to 10 (Turkey) basis (FAA, section 516(b)(2) (reference (b))). At the end of the 4-
year period the ratio must not be less than 7:10. DSCA monitors the ratio, which is calculated on
the current value of actual EDA offers vice notifications.
        C11.5.2.3. Country Priority for EDA. Priority is given to NATO countries on the
southern and southeastern flank of NATO, to major non-NATO allies on such southern and
southeastern flank, and to the Philippines (FAA, section 516(c)(2) (reference (b))). Countries
currently eligible for priority delivery are Egypt, Greece, Israel, Jordan, Portugal, and Turkey.
Next priority is to countries eligible for assistance authorized by the NATO Participation Act of
1994 (Section 609 of Public Law No. 104-208 (reference (cm))). As of January 1, 1997 these
countries include Poland, Hungary, the Czech Republic, and Slovenia (Section 606 of Public
Law 104-208 (reference (cm))).



                                                   501                                        CHAPTER 11
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   C11.5.3. Congressional Notification Requirements. Proposed EDA grants or sales that
contain SME or whose original acquisition value is $7M or more require a 30-calendar day
Congressional Notification (FAA, section 516(f) (reference (b)), Foreign Operations, Export
Financing and Related Programs Appropriations Act). Notifications shall include:
      C11.5.3.1. The purposes for which the article(s) is provided to the country, including
whether the article(s) was previously provided to the country;
       C11.5.3.2. The impact on the U.S. Forces military readiness;
       C11.5.3.3. The impact on the national technology and industrial base and the impact on
opportunities of this base to sell new or used equipment to the country;
       C11.5.3.4. The current value and original acquisition value of the article(s); and
       C11.5.3.5. As required, an estimate of PCH&T funds needed for transfers.
    C11.5.4. EDA Pricing. EDA items are priced in accordance with DoD 7000.14-R (reference
(o)), Volume 15, Chapter 7. EDA items are priced between 5 percent to 50 percent of the
original acquisition value depending on age and condition. Section 706 of Public Law 106-280
(reference (cp)) (the Security Assistance Act of 2000) states that it is the sense of Congress that
the President should make expanded use of the authority to sell EDA by using the flexibility to
ascertain the market value of the EDA. USD(C) is responsible for approving pricing exceptions.
Storage charges are not automatically applied to EDA transfers; however, reasonable charges can
be assessed against items stored beyond 60 days past LOA acceptance. These charges must be
stated in an LOA note. See Chapter 5, Table C5.T5. for the exact note wording.
    C11.5.5. Joint Visual Inspection (JVI) of EDA. Transfer approval for EDA items is granted
by DSCA upon either a determination by the Director, DSCA to transfer the EDA materiel, or
upon completion of the Congressional Notification, if required. Recipient countries are then
encouraged to perform a JVI of the EDA materiel condition before accepting it. Under the EDA
program, JVIs of materiel cannot occur prior to transfer approval from DSCA unless DSCA
(Programs and Strategy Directorates) has granted an exception. DSCA grants an exception to
allow a JVI of EDA materiel to take place prior to transfer approval only if it is advantageous to
U.S. interests and every effort is made on the part of the Implementing Agency to prevent false
impressions. A blanket exception is granted when the EDA is owned by DRMS. To request a
waiver to existing policy on the JVI of EDA materiel, Implementing Agencies shall use the
sample letter and worksheet in Figure C11.F4.




                                                 502                                   CHAPTER 11
                                                                                     DoD 5105.38-M, October 3, 2003


       Figure C11.F4. Letter and Worksheet for Exception to Joint Visual Inspection Policy

                                                Command Letterhead


 From:                Director, [insert Command]
 To:                  Director, Defense Security Cooperation Agency
                      Attn: Strategy Directorate


Subject: Request For Waiver To Perform Joint Visual Inspection (JVI) of Excess Defense Articles (EDA) Prior to
         Transfer Approval


Enclosure: JVI Waiver Worksheet – [insert proposed item and country]


       This memorandum requests that a waiver be granted by DSCA allowing a JVI to be performed on [insert
item] in support of the proposed EDA transfer to [insert country]. Transfer approval has not yet been granted by
DSCA for this proposed transfer. The enclosed is forwarded for your consideration.


       If a waiver is approved, [insert Command] will make every effort to prevent the false impression, on the part
of the recipient country, that a transfer will take place once a JVI has been completed. [Insert Command] will
ensure that the U.S. [insert MILDEP], to include any individual representing the U.S. [insert MILDEP], will not
make commitments, expressed or implied, to furnish funds, goods or services in relation to this proposed EDA
transfer to [insert country] until transfer approval has been granted.


      The point of contact for this action is [insert name, telephone number, and e-mail address].




                        JOINT VISUAL INSPECTION (JVI) WAIVER WORKSHEET
Proposed Recipient: [insert country name and armed forces branch]
Equipment/Materiel: [insert name and nomenclature]
Excess Quantity: [insert quantity]
Date EDA Request was submitted to DSCA: [insert month, date and year]
Proposed Transfer Date of EDA: [insert month, date and year]
Proposed Date of JVI: [insert month, date and year]
Detailed Justification for the JVI: (include special circumstances why this JVI must be performed prior to transfer
approval being granted; why it is advantageous to U.S. interests to perform JVI early, adverse consequences to
materiel or schedule if JVI is not performed early, etc.)
Cost of JVI: [insert dollar value] (It must be explained to the customer that if transfer approval is not granted, they
will still be responsible for these costs.)
Case Designator for the JVI: (include Letter of Offer and Acceptance [LOA] designator and Amendment or
Modification number if applicable):
Enclosure (1)




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                                                                               DoD 5105.38-M, October 3, 2003


    C11.5.6. Blanket Order Excess Defense Article (EDA) Transfers. Blanket order EDA cases
and/or lines may be established only for non-SME consisting of spare parts and/or components,
clothing, basic field equipment, and office equipment, supplies, furniture, or other non-SME
items as approved by DSCA (Programs Directorate). Blanket order cases and/or lines for
packing, crating, handling, and transportation (PCH&T) may also be written in conjunction with
EDA transfers of similar, non-SME items when the purchaser requests these services. These
LOAs must identify the end-item application. Items on blanket order EDA FMS cases/lines are
transferred in accordance with the purposes of FAA, section 502 (reference (b)); AECA, section
4 (reference (c)), and the requirements of FAA, section 516 (reference (b)).
    C11.5.7. Title Transfer of EDA Items. Title to EDA items transfers at the point of origin
except for items located in Germany. EDA items in Germany transfer title at the nearest point of
debarkation outside of Germany. When using Space Available transportation or paying for
transportation with DoD funds, title transfer at the destination should be considered on a case-by-
case basis.
    C11.5.8. Offer Termination. An unforeseen urgent U.S. Forces' requirement for an excess
item may arise after it is offered to a country. Withdrawal of the offer should occur only after
U.S. requirements have been weighed against the potential damage to foreign policy goals.
When items previously offered are no longer available, the MILDEPs must notify DSCA
(Programs Directorate).
    C11.5.9. Limitation on Assistance to Countries in Default. Per FAA, section 620(q)
(reference (b)) and annual legislation in the Foreign Operations, Export Financing and Related
Program Appropriations Act, no assistance to include grant transfers of EDA shall be furnished
to any country that is in default in payment to the United States of principal or interest on any
loan made to such country under either of these Acts. For countries that are in default of
payment in excess of 6 calendar months, all grant EDA transactions for the affected country are
put on hold until the sanction is lifted. For countries that are in default of payment in excess of 1
calendar year, all grant EDA transactions for the affected country are cancelled. Sales of EDA
continue to be permitted under these sanctions.
   C11.5.10. EDA Process. Table C11.T8. summarizes the EDA process.
                                   Table C11.T8. EDA Process Flow
    Step                                                      Action
      1         Prior to the fiscal year end, the MILDEPs forward a list of available EDA assets (type and
 Determine      quantity, not to include secondary items) to DSCA and a list of assets that are forecasted to
  Materiel      become EDA during the next calendar year in accordance with AECA, section 25(a) (reference
 Availability   (c)). DSCA submits this information to the DoS during the annual JAVITS reporting cycle.
                The MILDEPs use survey messages to evaluate country requirements. (This does not apply to
                SME when allocation has already been coordinated between the MILDEPs and DSCA.). Copies
      2         of survey messages SHOULD NOT be forwarded to SCO offices that are not included as an action
                or information addressee. Inappropriate release could provide a false impression of DoD intent to
  MILDEP        offer materiel to a country not approved by the Department of Defense, DoS, and DoC. The
Issues Survey   following conditions apply to the survey.
   Message
                Survey messages, for other than SME, are drafted by the MILDEPs and addressed to the SCOs for
                action, with DSCA, DoS, DoC, the Chairman of the Joint Chiefs of Staff (J-5) and the Combatant
                Commanders as information addressees. Surveys normally include item(s) description, condition,


                                                        504                                        CHAPTER 11
                                                                                 DoD 5105.38-M, October 3, 2003


    Step                                                       Action
                rough order of magnitude cost/value of end items, costs and lead-times for support items,
                supportability dates and other information as appropriate. Survey messages should allow, to the
                maximum extent feasible, a 45-day response time.
                Survey messages for SME are forwarded to DSCA for coordination and approval with the
                Chairman of the Joint Chiefs of Staff (J-5), the DoC, and the DoS before release to the SCOs for
                action. The issued survey message is sent only to the SCOs approved to receive copies by the
                coordination process with information copies to DSCA, the DoS, the DoC, the Chairman of the
                Joint Chiefs of Staff (J-5), and the Combatant Commanders.
                Survey messages may be initiated only by the owning MILDEPs/Agencies and the USCG. The
                DSCA must approve surveys conducted by other than the owning MILDEPs.
                A foreign country or international organization identifies a requirement for EDA by:
                Responding to a survey message. SCO responses to these surveys should include a transfer
                justification as well as an assessment of the proposed recipient’s capabilities to fund follow-on
     3
                operational, maintenance, and training requirements. The SCO responses are provided to the
 Purchaser      MILDEPs with a copy to the Combatant Commander, the Chairman of the Joint Chiefs of Staff,
Requests for    and the DSCA.
   EDA
                Submitting a Letter of Request (LOR).
                Visiting the Defense Reutilization and Marketing Office (DRMO) or locating items via the DRMS
                web site.
                MILDEPs must respond to an EDA request within 20 days. Responses should state which items
                are available and which items are currently not available as EDA. They should also indicate, if
                known, the fiscal year when such items may become available. An information copy of this
                response is sent to DSCA (Programs Directorate). No offer may be made at this time unless the
                appropriate approvals/notifications are completed. The MILDEPs must screen all EDA for Missile
                Technology Control Regime (MTCR) (see Chapter 3). If the item is not available, the MILDEP
      4         shall keep the request on-hand until the items become available or the request is withdrawn.
 Responses to   If enough assets are available, the MILDEP submits the required information within 30 days to
EDA Requests    DSCA for coordination, approval and notification (if required) prior to offer. Figure C11.F5.
                illustrates the standard memorandum and attachment that must be completed for each proposed
                EDA transfer. A detailed justification, based on country requirements, must be included in each
                memorandum. Additionally, the national stock number and the MASL of the item(s) proposed as
                EDA must be included in the information provided to DSCA to facilitate acceptance and delivery
                reporting by the MILDEPs at the end of each fiscal year. Go to Step #9.
                If enough assets are not available, go to Step #5.
     5          If requests exceed available assets, the MILDEP submits a proposed allocation plan to DSCA
  MILDEP        (Programs Directorate) within 30 days. The MILDEP should consider the Combatant
Requests EDA    Commander’s regional EDA allocation priorities when developing their recommendations. Figure
 Allocation     C11.F6. illustrates the standard format for requests for allocation plans.

      6         DSCA (Programs Directorate) works with OSD regional offices and the Chairman of the Joint
                Chiefs of Staff to develop a DoD position on which country(ies) should receive the asset(s).
   DSCA         Concurrently, the DoS works with its offices to determine a DoS position on allocation of the
Develops DoD    assets. When possible, interested parties are notified 30 days in advance to prepare papers and
  Position      justify their proposed allocation plans.
                DSCA (Programs Directorate) and the DoS co-chair an EDA CORCOM meeting to develop a
     7          coordinated plan to allocate EDA assets to potential recipients when requirements exceed assets.
   EDA          The EDA CORCOM also consists of members from the Chairman of the Joint Chiefs of Staff (J-5)
Coordinating    and the DoC. DSCA consolidates and represents the input of each of the regional offices within
 Committee      OSD. The EDA CORCOM considers the following criteria:
(CORCOM)        Arms transfer criteria specified by the President’s Conventional Arms Transfer Policy
 Convened
                Security Cooperation Guidance



                                                         505                                         CHAPTER 11
                                                                                DoD 5105.38-M, October 3, 2003


    Step                                                         Action
                Regional balancing as dictated in legislation or to achieve maximum benefit for the United States
                Potential impact on the ability of U.S. Industry to sell new or used equipment
                Matches of country requirements with items available
                Ability of the country to effectively use the items
                Item location and transportation requirements
                Ability of the country to afford refurbishment/support of items
                If the EDA CORCOM finalizes an allocation plan, the Director, DSCA signs and sends the
      8         allocation plan to the relevant MILDEP for action. If the EDA CORCOM cannot finalize an
   Staffing     allocation plan, a recommended allocation plan is staffed for approval within OSD Policy before
Recommended     submission to the DoS for final approval. This coordination process takes approximately 30 to 45
  Allocation    days. After DoS approval, the Director, DSCA signs and sends the allocation plan to the relevant
     Plan       MILDEP for action. The Congressional Notification/final approval steps are still required on
                individual transfers identified in the approved allocation plan.
                If the proposed transfer does not meet Congressional Notification requirements, go to Step #10.
                If the proposed transfer requires Congressional Notification, DSCA assembles a Congressional
      9         Notification package. DSCA (Programs Directorate) coordinates the package with the Under
Congressional   Secretary of Defense for Policy (USD(P)) regional office, DSCA (Operations and Strategy
 Notification   Directorates, Office of the General Counsel, and Legislative and Public Affairs), the DoC and DoS
                Bureau of Political/Military Affairs/Regional Security and Arms Transfer Directorate (DoS
                (PM/RSAT)). The Congressional Notification period is 30 days. Go to Step #11.

     10         For transfers that do not require Congressional Notification, a DSCA Determination is required
                before items can be authorized for transfer. DSCA prepares this Determination and coordinates it
    EDA         with the USD(P) regional office, DSCA (Operations Directorate and the Office of the General
Determination   Counsel), the DoC and the DoS (PM/RSAT).
                For EDA sales or grant transfers, DSCA Programs sends a message to the MILDEP authorizing
                the offer and transfer of items to the proposed country. An information copy is sent to the SCO,
      11        DoS, the Combatant Commander, the Chairman of the Joint Chiefs of Staff (J-5), and Maritime
Authorization   Administration (MARAD). Each message contains a Record Control Number (RCN) associated
to Offer EDA    with the grant transfer that is used for requisitions. MILDEPS should not submit LOAs for EDA
                grants, sales, or associated services to DSCA prior to their receipt of DSCA’s authorization
                message.
                The MILDEPs prepare an LOA for the grant EDA items, any EDA items being sold, and/or any
                supporting services or non-EDA articles associated with the transfer. For cases in which EDA is
                not the primary item being transferred, normal case writing rules apply. For cases in which EDA
                is the primary item being transferred, the following three steps apply:
                   1) Case nickname: “EDA Grant” or “EDA Sale.”
                   2) Term of Sale: If the EDA transfer is a grant item, the term of sale should reflect “EDA
                        Grant.” If there are non-EDA grant items on the LOA, the LOA must include a dollar
     12                 breakout for each term of sale used.
    LOA            3) Case Description:
 Preparation            a) For an EDA grant transfer the case description should include the statement “is for the
    and                     EDA grant transfer of [quantity] of [material nomenclature] under Section 516 of the
 Processing                 Foreign Assistance Act of 1961 as amended…”
                        b) For an EDA sale, the case description should include the statement, “is for the EDA
                            sale of [quantity] of [material nomenclature] under Section 21 of the Arms Export
                            Control Act as amended…”
                The following additional rules apply for any line of any case in which EDA is being transferred by
                grant or sale:
                   4) Line Item Description: For both EDA grants and sales, including amendments or
                        modifications when an EDA grant or sales line item is added or changed, the line item



                                                        506                                         CHAPTER 11
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    Step                                                       Action
                      description must include the EDA original acquisition value.
                 5) Source Code: “E” for “Excess.”
                 6) Type of Assistance Code:
                      a) For an EDA grant transfer: “A – FAA Excess Defense Articles - non-reimbursable”
                      b) For an EDA sale: “3 – Cash Sale from Stock-payment in advance” or appropriate code
                           for corresponding Term of Sale.
                   7)        If the EDA transfer is a grant, offer release code and delivery term code may remain
                             blank if special shipping instructions apply.
                 8) If the EDA transfer is a grant, unit and total price should reflect $0 value. EDA sales
                      follow normal LOA writing rules for inclusion of unit and total price.
                 9) Line item description note: Each line for an EDA grant or sale item must include a line
                      item description note that includes the equipment being transferred, item nomenclature,
                      quantity, original acquisition value, and current estimated value at the time of transfer,
                      location, condition code and Record Control Number (RCN). If the EDA transfer is a
                      grant, include the phrase “Grant Value is $0” to correspond with the $0 value in the line.
                 10) Special EDA notes must be included as standalone notes on the LOA. See Chapter 5, Table
                      C5.T5., for exact wording.

     13        The Implementing Agency is required to complete a DD 1348-1a, “Issue Release/Receipt
               Document;” DD 1149, “Requisition and Invoice/Shipping Document;” or other equivalent form,
DD Form 250    such as a DD 250 “Material Inspection and Receiving Report,” as official documentation of
 Preparation   delivery.
      14       MILDEPs notify DSCA (Programs Directorate) when offers have been accepted/rejected and
Tracking EDA   items have been delivered. Not later than 45 days following the end of the fiscal year, the
  Offers and   MILDEPs provide DSCA a year-end report of accepted/delivered offers from each MILDEP. The
  Deliveries   MILDEPs provide this data in the format required by DSCA (Programs Directorate)




                                                       507                                        CHAPTER 11
                                                                                        DoD 5105.38-M, October 3, 2003


                  Figure C11.F5. Sample EDA Transfer Memorandum and Enclosure

                                                Command Letterhead
 From:      Director, [insert Command]
 To:        Director, Defense Security Cooperation Agency
Subject: Recommendation To Transfer Excess Defense Articles [insert as grant or sale]
Encl:    Excess Defense Article (EDA) Worksheet – [Insert item being transferred]
This memorandum provides information on the proposed transfer of excess [insert item description] to [insert
country]. The enclosed is forwarded for your consideration.
The Command knows of no U.S. industry initiative to market similar [insert item description] to [insert country].
There will be no adverse impact upon U.S. military readiness as a result of this transfer. Further, the items are
excess to Department of Defense requirements, including those of the National Guard and Reserve Components.
The proposed transfer [does or does not] contain equipment that includes Missile Technology Control Regime
(MTCR) controlled items. (If it does contain MTCR controlled items add the following: A list of possible MTCR
controlled items was sent to DSCA on [insert date] and a copy is attached.) The equipment has been checked by a
qualified reviewer and is MTCR compliant.
Recommend that the U.S. Government offer [insert item description] to [insert country] as a [indicate whether it is
for grant or sale].
The point of contact for this action is [insert name, telephone number, and e-mail address].




                                  EXCESS DEFENSE ARTICLE WORKSHEET
Proposed Recipient: [insert country and armed forces branch]
Applicable Section of FAA/AECA: [insert transfer authority]
 Equipment/Materiel:                                          Nomenclature:
 National Stock Number:                                       MASL:
 Excess Quantity:                                             Serial Number: (if applicable):
Detailed Justification for the Transfer (include equipment application, mission, capability, supportability, suitability,
quantity of similar equipment previously transferred, and quantity of equipment based on force requirements):
Other foreign requirements and why this requirement should be satisfied (if EDA Coordinating Committee has not
reviewed these allocations):
Unit Original Acquisition Value (in case of multiple spares, include method used to assess total value of lot(s)):
[insert dollar figure]
Materiel Condition and Current Unit Value (include method used to assess value in accordance with DoD 7000.14-
R, Volume 15, Chapter 7, paragraph 070304).
 Materiel condition as defined by paragraph 070304 is           [insert Condition Code].
 Unit current value is                                          [insert dollar figure].
 Estimated Total Package Cost:                                  [insert dollar value]
 (to include item(s) if a sale, refurbishment, training and PCH&T)
 Estimated Total Acquisition Value:                             [insert dollar value]
 Estimated Total Current Value:                                 [insert dollar value]
 (Reference DoD 7000.14-R, “DoD Financial Management Regulation,” Volume 15, Chapter 7, paragraph 070304)



                                                            508                                           CHAPTER 11
                                                                                    DoD 5105.38-M, October 3, 2003


                          Figure C11.F6. Sample EDA Allocation Plan Request

                                               Command Letterhead
 From:       Director, [insert Command]
 To:         Director, Defense Security Cooperation Agency
Subject: Recommendation For Allocation Of Excess Defense Articles
Enclosure:          Excess Defense Article (EDA) Allocation Worksheet – [insert item being transferred]
This memorandum provides information on the proposed allocation plan for excess [insert item description]. The
enclosed is forwarded for your consideration.
The Command knows of no U.S. industry initiative to market similar [insert item description] to [insert country
names].
There will be no adverse impact upon U.S. military readiness as a result of these transfers. Further, the items are
excess to Department of Defense requirements, including those of the National Guard and Reserve Components.
The proposed transfer [insert does or does not] contain equipment that includes Missile Technology Control Regime
(MTCR) controlled items. (If it does contain MTCR controlled items add the following: A list of possible MTCR
controlled items was sent to DSCA on [insert date] and a copy is attached.) The equipment has been checked by a
qualified reviewer and is MTCR compliant.
Recommend that you convene the EDA Coordinating Committee as soon as possible to establish an approved
allocation plan.
The point of contact for this action is [insert name, telephone number, and e-mail address].




                         EXCESS DEFENSE ARTICLE ALLOCATION WORKSHEET

 Equipment/Materiel:                           [insert nomenclature]

 Excess Quantity:                              [insert quantity]



Detailed Information on the EDA Item(s) (include equipment capabilities, supportability, and suitability; minimum
number required for operations; and Rough Order of Magnitude Cost for refurbishment and support).

 Valid Letters of Request Received From:       [insert country and quantities]

 Proposed Recipient(s):                        [insert country and armed forces branch]

 Proposed Method of Transfer:                  [insert Grant or Sale per proposed recipient]

Detailed Justification for Each Proposed Transfer: [include equipment application/ mission, quantity of similar
equipment previously transferred, and quantity of equipment needed based on force requirements]




                                                            509                                         CHAPTER 11
                                                                     DoD 5105.38-M, October 3, 2003


     C11.5.11. EDA for Naval Vessels. Navy International Programs Office (IPO) is responsible
for transfers of U.S. Navy vessels and for the administration of transfers of USCG vessels in
accordance with the March 10, 2004 Memorandum of Agreement (MOA) between Navy IPO
and the USCG. Ship Transfer Allocation Plans and accompanying legislation must be approved
at the Chief of Naval Operations or Secretary of the Navy level before forwarding to USD(P) for
DSCA action. DSCA coordinates all EDA ship transfers with USD(P), the Chairman of the Joint
Chiefs of Staff (J-5), the DoC, and the DoS. DSCA ensures compliance with statutory
notification and authorizing legislation requirements.
   C11.5.12. EDA of USCG Items. LOAs for the sale or services associated with excess USCG
equipment are developed and written by Navy IPO in accordance with the March 10, 2004 MOA
between the USCG and Navy IPO.
    C11.5.13. Defense Reutilization and Marketing Service (DRMS) Transfers. Matches of
country needs and MILDEP-held excesses are usually limited to significant end items. Other
EDA, including most secondary items, are transferred to a DRMO when it becomes excess.
DRMO-held EDA are listed on the DLA DRMS Web Page (http://www.drms.dla.mil), a
computerized inventory searching service designed to provide information on all stock-numbered
items in the DRMS inventory.
C11.6. FOREIGN ASSISTANCE ACT (FAA), SECTION 607 TRANSFERS
    C11.6.1. FAA, Section 607 Sales Definition and Purpose. FAA, section 607 (reference (b))
provides the authority to sell defense commodities and services to friendly countries,
international organizations, the American Red Cross, and voluntary nonprofit relief agencies
approved by the Agency for International Development (AID). Most FAA, section 607
assistance is provided for the United Nations peacekeeping operations (PKO), which may also be
supported under the AECA. FAA, section 607 sales require a DoS or AID determination that
furnishing the proposed defense articles or services is consistent with and within the limitations
of the FAA.
    C11.6.2. Requests for FAA, Section 607 Sales. Agencies may request defense articles and
services from DSCA by submitting an LOR. Prior to development of a Pseudo LOA, the
Implementing Agency furnishes Pricing and Availability (P&A) data to DSCA (Operations
Directorate) for coordination within OSD.
    C11.6.3. FAA, Section 607 Pseudo LOA. The USG uses a Pseudo LOA to track the sale of
defense articles and/or services (to include training, and design and construction services) under
the authority of FAA, section 607 (reference (b)). The Pseudo LOA itemizes the defense articles
and/or services included in the LOR. Unlike other Pseudo LOAs, Pseudo LOAs under FAA,
section 607 (reference (b)) authority ARE signed by the country and/or organization receiving
the articles and/or services.
        C11.6.3.1. FAA, Section 607 Pseudo LOA Preparation Timeframe. Pseudo LOAs are
categorized as “Group D” and will be processed according to the guidelines provided in Chapter
5, paragraph C5.4.2.




                                                 510                                  CHAPTER 11
                                                                                  DoD 5105.38-M, October 3, 2003


       C11.6.3.2. FAA, Section 607 Pseudo LOA Preparation. The Implementing Agency
develops an FAA, section 607 Pseudo LOA in DSAMS to allow execution of these programs
through existing Security Assistance automation systems. Pseudo LOAs follow the same LOA
preparation guidelines as FMS cases (see Chapter 5, paragraph C5.4.6.).
        C11.6.3.3. FAA, Section 607 Pseudo LOA Format. LOA format guidance provided for
FMS cases in Chapter 5, Figure C5.F5. applies to FAA, section 607 Pseudo LOAs except as
identified in Figure C11.F7.
         Figure C11.F7. Unique Instructions for Preparing FAA, Section 607 Pseudo LOAs
      Unique Instructions for Preparing a Pseudo Letter of Offer and Acceptance for FAA, Section 607 Cases
         Case Identifier. For FAA, section 607 Pseudo LOAs, the case identifier is composed of country code “S5”
         (FAA, section 607 Transactions – Reimbursable Support) or “S6” (FAA, section 607 Transactions – Payment
 1.
         in Advance), the Implementing Agency code of the DoD Component providing support, and a case
         designator assigned by DSCA (Strategy Directorate).
         Nickname Field. The country/organization receiving the support and the type of support (e.g., FAA, section
 2.
         607) is identified in the “nickname” field on the Pseudo LOA.
         Purchaser’s Reference. The DoS Determination that covers the region or country being supported is entered
 3.
         in the “Based on” field.
 4.      Terms of Sale. The Term of Sale for all FAA, section 607 Pseudo LOAs is “Cash with Acceptance.”

          C11.6.3.4. Pricing of FAA, Section 607 Pseudo LOAs
           C11.6.3.4.1. Pricing FAA, Section 607 Pseudo LOAs - Articles. The price of articles
sold under this authority is the acquisition cost, adjusted as appropriate for condition and age; or
the DWCF standard price.
             C11.6.3.4.2. Pricing FAA, Section 607 Pseudo LOAs – Services and/or Training.
The price of services and/or training sold under this authority is the amount of additional costs
incurred by the Department of Defense to provide such services. For DoD airlift services, the
rate is that specified for Joint Chiefs of Staff exercises in the Catalog of U.S. Government and
Non-U.S. Government Airlift Rates published annually by TRANSCOM.
           C11.6.3.4.3. Pricing FAA, Section 607 Pseudo LOAs – Surcharges and Accessorials.
FMS surcharges and accessorial rates apply. DoD FMS resources support this effort and are
reimbursed through the normal FMS surcharges and accessorial accounts. Any request to
deviate from the application of these surcharges must be sent to DSCA (Business Operations
Directorate) for approval.
           C11.6.3.4.4. Pricing FAA, Section 607 Pseudo LOAs – Nonrecurring Cost (NC). NC
does not apply to FAA, Section 607 pseudo LOAs.




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                                                                     DoD 5105.38-M, October 3, 2003


        C11.6.3.5. Additional FAA, Section 607 Pseudo LOA Information. Each FAA, section
607 Pseudo LOA must include a copy of the Determination authorizing the FAA sale as an
attachment. The LOA Standard Terms and Conditions apply to FAA, section 607 Pseudo LOAs.
Other notes that are mandatory for FMS cases (e.g., Offsets, Unauthorized Use of Defense
Articles) also apply to FAA, section 607 Pseudo LOAs. Notes regarding inclusion of charges on
the document (e.g., Administrative Surcharge and Contract Administration Services (CAS)
notes) apply to these Pseudo LOAs. Unique notes should be included on each FAA, section 607
Pseudo LOA to ensure readers can understand the program. In addition to these notes, there are
mandatory standard notes that must be included on each FAA, section 607 Pseudo LOA:
Authority for Sale – FAA, section 607 and End Use – FAA, section 607. See Chapter 5, Table
C5.T5. for exact wording of these notes.
       C11.6.3.6. DSCA Coordination and Countersignature of FAA, Section 607 Pseudo
LOAs. All FAA, section 607 Pseudo LOA documents require DSCA countersignature (see
paragraph C5.4.14.). The Implementing Agency posts the country acceptance milestone in
DSAMS after purchaser signature.
        C11.6.3.7. FAA, Section 607 Support to the United Nations. Rather than sign Pseudo
LOAs, the United Nations incorporates the documents into United Nations Letters of Assist
(UNLOAs). UNLOAs are considered by the United Nations to be firm fixed-price contracting
documents. They are submitted, with a copy to DSCA, to the Implementing Agency for review
of prices, delivery dates, and other data. After coordination with the Implementing Agency and
appropriate OSD and DoS activities, DSCA provides approval to the Implementing Agency to
provide the commodities or services. Multiple UNLOAs should not be executed on a single
Pseudo LOA. However, multiple Pseudo LOAs may be prepared to support a single UNLOA.
    C11.6.4. Management of FAA, Section 607 Funds. FAA sales may be cash in advance (the
preferred method) or reimbursable. When advance funds are not available, DoD direct
appropriations may be used and MIPRs are prepared. The amount on the MIPR should equal the
above-the-line value reflected in the Pseudo LOA. FAA, section 607 (reference (b)) provides
contract authority but does not increase obligation authority, as would a dependable undertaking.
DFAS Indianapolis establishes a sub-account within the FMS Trust Fund for these transactions.
If advance payments are deposited into this account, standard procedures, including direct citing
of the FMS Trust Fund on the DoD contract, apply. If the recipient of the support does not
provide funds in advance, the Implementing Agency may be required to use applicable direct
appropriations to fund the support and seek reimbursement from the FMS Trust Fund upon
receipt of payment from the purchaser. The Implementing Agency must advance funds to the
FMS Trust Fund in order to use direct cite or self-reimbursement procedures. If reimbursement
does not occur within 180 days after the close of the fiscal year in which items were delivered or
services performed, funds received must be deposited as U.S. Treasury Miscellaneous Receipts.
    C11.6.5. FAA, Section 607 Pseudo LOA Reporting. The DSCA 1200 system is not used to
record FAA, section 607 Pseudo LOAs. DIFS distinguishes FAA, section 607 agreements from
other FMS agreements using the Pseudo LOA case designator. The Implementing Agency does
delivery reporting for these cases. Transportation costs for FAA, section 607 Pseudo LOAs are
reported as actual costs on above-the-line delivery reports. All delivery reports must contain
Delivery Term Code (DTC) “4” and Transportation Bill Code (TBC) “D.” Government Bills of
Lading do not direct cite the FMS Trust Fund Transportation Clearing Account.


                                                 512                                  CHAPTER 11
                                                                      DoD 5105.38-M, October 3, 2003


     C11.6.6. FAA, Section 607 Pseudo LOA Billing. For non-United Nations support, standard
billing procedures are used for FAA, section 607 pseudo LOAs. For United Nations support, the
following guidelines apply:
        C11.6.6.1. FAA, Section 607 Billing – “S6” Pseudo LOAs. The Implementing Agency
provides DFAS Indianapolis a monthly forecast using a payment schedule. DFAS Indianapolis
prepares a special monthly bill on or about the 15th of each month. The bill shows the Pseudo
LOA and the UNLOA designators and forecasted payment amount for the current month. It is
based on delivery reports received from the Implementing Agency. Monthly delivery listings are
also provided to the United Nations. DFAS Indianapolis coordinates the bill with DSCA and
forwards it to the United Nations through the U.S. United Nations Mission.
        C11.6.6.2. FAA, Section 607 Billing – “S5” Pseudo LOAs. DFAS Indianapolis prepares
a special monthly bill on or about the 15th of each month. The bill shows the Pseudo LOA and
the UNLOA designators and forecasted payment amount for the current month. It is based on
delivery reports received from the Implementing Agency. Monthly delivery listings are also
provided to the United Nations. DFAS Indianapolis coordinates the bill with DSCA and
forwards it to the United Nations through the U.S. United Nations Mission.
C11.7. FOREIGN ASSISTANCE ACT (FAA), SECTION 632 TRANSFERS
    C11.7.1. Definition and Purpose. FAA, section 632 (reference (b)) sales and transfers
provide USG agencies (Purchaser Agencies) access to defense articles and services for carrying
out other FAA functions.
        C11.7.1.1. FAA, Section 632(a) - Transfer of Obligation Authority. FAA, section 632(a)
(reference (b)) authorizes the allocation or transfer of funds (available for carrying out the
purpose of the FAA) to any USG agency. Such funds are available for obligation and
expenditure in accordance with the authority granted by the FAA or under the authority
governing the activities of the USG agency to which the funds are allocated or transferred. An
FAA, section 632(a) transfer is not a purchase. Receipt of FAA, section 632(a) transfer funding
authority does not constitute an obligation. The receiving agency must obligate the funds within
the appropriation's original period of availability. Under an FAA, section 632(a) transfer, the
transferring agency has no further responsibility for the project costs including no responsibility
to provide additional funding for cost overruns and changes. FAA, section 632(a) transfers are
subject to the statutory limitations placed on the use of the appropriations from which they are
drawn.
        C11.7.1.2. FAA, Section 632(b) - Inter-Agency Purchase Authority. FAA, section
632(b) (reference (b)) authorizes any officer of the USG carrying out functions under the FAA to
use the services and facilities of or procure commodities, defense articles, or military education
and training from any USG agency, as the President shall direct, or with the consent of the head
of such agency. Unlike FAA, section 632(a) transfers, interagency purchase agreements issued
under authority of FAA, section 632(b) constitute an obligation of appropriated funds.
Responsibility for funding cost overruns in excess of the funded amount should be clearly stated
in the interagency agreement between the parties and should be the responsibility of the
Purchaser Agency.




                                                 513                                   CHAPTER 11
                                                                  DoD 5105.38-M, October 3, 2003


    C11.7.2. Requests for FAA, Section 632 Agreements. The Purchaser Agency submits an
MOA to DSCA for the desired items and services. The MOA, the acceptance by DSCA, and the
transfer of obligation authority or purchase authority to DSCA serve as the framework for the
DoD FMS community to provide support. The MOA may be modified or canceled upon mutual
agreement of the Purchaser Agency and the Department of Defense in writing. Figures C11.F8.
and C11.F9. are examples of an MOA and MOA Amendment. The DoS is responsible for
obtaining FAA, section 505 assurances from proposed receiving countries.




                                              514                                  CHAPTER 11
                                                                                         DoD 5105.38-M, October 3, 2003


                       Figure C11.F8. Memorandum of Agreement (MOA) Template

                                    MEMORANDUM OF AGREEMENT (MOA)
                                                 BETWEEN
                                        (NAME OF FEDERAL AGENCY)
                                                 AND THE
                                   UNITED STATES DEPARTMENT OF DEFENSE
Pursuant to Section 632(b) and Chapter [insert chapter number] of Part [insert part number] of the Foreign
Assistance Act of 1961, as amended (“FAA”), [insert agency requesting support] hereby agrees to provide funds to
the Defense Security Cooperation Agency (“DSCA”) of the United States Department of Defense (“DoD”) in
accordance with this Memorandum of Agreement (“Agreement”).
I.       AUTHORITY
This Agreement is entered into as the means to provide funding to DSCA pursuant to FAA, section 632(b) in the
amount of [state the amount in both numbers and words] in FY [insert the year and title of the appropriated funds]
funds. Funds provided under this Agreement are available for obligation for the purpose for which such funds were
authorized, in accordance with authority granted in the FAA until [insert the last date the funds are available for
obligation].
II.       PURPOSE
Funds provided under this Agreement will be used by DSCA to fund the provision of [insert the defense article or
service] to [insert the requesting agency] to support [insert the name of the program being supported]. The articles
and services shall include the following: [insert description of the articles and services].
Defense articles or services provided are subject to the statutory limitations and requirements placed on the
appropriation. Further, this Agreement does not provide any export or other authorization to commercial entities or
persons for the export of the defense articles or defense services. Licenses or other approvals, as required by the
Arms Export Control Act and its implementing regulations, must be approved by the DoS and other federal
agencies. Applicable statutory or regulatory requirements must be met.
III.       FISCAL TERMS
       A. Execution of this agreement shall constitute an obligation of funds in the amount of $ [insert the amount of
       the obligations]. [Insert requesting agency] remains liable for all costs arising out of this Agreement, and
       DSCA will return all excess funds to [insert requesting agency]. Disbursement will be made as described
       below.
       B. Paragraph II of this Agreement contains a description of the items/services to be provided and the
       associated estimated cost (including administrative costs).
       C. Billing and payment will be effected through [insert the billing and collection tracking system to be used]
       using the information contained in this Agreement. Notice of the billing and the accompanying documentation
       should be sent to the following office:


                                      [Insert the address for the billing information]
       D. The following fiscal data shall be noted on all bills (some or all of these may apply):
 Appropriation:                            Budget Plan:                            Bureau Code:
 Activity:                                 APC:                                    Object Class:
 Project Code:                             Fund:
 Agreement Number:                         Mod. #:
When payment is processed, DSCA will include in the remarks section the Agreement Number, the Modification
Number, and [insert any information specifically required by the requesting agency].
       E. Funds will be provided by the [insert requesting agency] to DSCA FMS Trust Fund upon signature by the
       last signing party of this MOA.




                                                              515                                         CHAPTER 11
                                                                                     DoD 5105.38-M, October 3, 2003


             Figure C11.F8. Memorandum of Agreement (MOA) Template (continued)
IV.       PERIOD OF AGREEMENT
This Agreement shall take effect as of the date of the last signature below and shall continue in effect until [insert a
date that allows sufficient time to complete all actions under this agreement].
V.        REPORTING
     A. DoD will keep full and complete records and accounts with respect to the use of funds provided under this
     Agreement in accordance with generally accepted accounting principles. DoD shall maintain relevant
     documentation to reflect procurement and other related costs. DSCA shall also provide [insert requesting
     agency] with quarterly reports of program activities, as well as any additional information or documentation that
     they may request from time to time regarding expenditures and activities, including any accounting or audit
     records concerning the funds provided under this Agreement. Each submission shall refer to this Agreement.
     B. DSCA shall submit reports required by this Agreement to [insert address of the submittal office of the
     requesting agency]. If the Servicing Agency is authorized to receive advance funding, then periodic reports
     showing the status of amounts advanced and amounts expended during the reporting period should be provided
     to the purchaser agency’s technical officer and disbursing office. A due date for the reports should be specified
     (e.g., the number of days following the reporting period).
     C. Upon conclusion of its responsibilities under this Agreement, DSCA shall
               1. Report to [insert requesting agency] that the funds provided by [insert requesting agency] to
                   DSCA were spent for the purposes for which the funds were provided; and
               2. Return excess funds to [insert requesting agency].
VI.       SUPPORT TO TERRORISM
The Servicing Agency is reminded that U.S. Executive Orders and laws prohibit transactions with and the provisions
of resources and support to individuals and organizations associated with terrorism. It is the legal responsibility of
the Servicing Agency to ensure that all subagreements, contracts, and grants issued under this Agreement comply
with these Executive Orders and laws.
VII.      OTHER TERMS AND CONDITIONS
     A. Delivery Terms: [Insert person or agency that will take delivery for the requesting agency] will take
     delivery of the articles in [insert delivery location] and provide a written record of receipt to the DoD
     Implementing Agency for this project. [Insert requesting agency] assumes responsibility for the security,
     accountability, and tracking of items and services provided.
     B. Administrative Surcharge: DSCA will assess an administrative surcharge of 3.8 percent on all items and
     services provided pursuant to this request.
     C. Other: [Either party may insert additional terms that are specific to the purpose of the agreement.]
     D. Two copies of this Agreement with original signatures have been provided, one for DSCA and one for
     [insert requesting agency]. One copy of this Agreement must be returned with original signatures. Duplicated
     signatures are not acceptable.
     E. Upon execution of this Agreement by DSCA, DSCA shall return one signed copy of this Agreement to:
     [Insert the address for receipt in the receiving agency]
     F. This Agreement may be modified or canceled upon written mutual agreement of [insert requesting agency]
     and DSCA.



 [Name]                                                      [Name]
 [Title]                                                     Director
 [Agency]                                                    Defense Security Cooperation Agency
                                                             U.S. Department of Defense
 Date:________________________________________               Date:________________________________________
 Attachment
 Funding Transfer Document




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            Figure C11.F9. Memorandum of Agreement (MOA) Amendment Template

                                  MEMORANDUM OF AGREEMENT
                                            BETWEEN
                                   (NAME OF FEDERAL AGENCY)
                                             AND THE
                              UNITED STATES DEPARTMENT OF DEFENSE
                                        AMENDMENT [___]
Pursuant to the Memorandum of Agreement of [insert date] between the [insert organization name] of the United
States Department of Purchaser Agency (“Purchaser Agency”) and the Defense Security Cooperation Agency
(“DSCA”) of the United States Department of Defense (“DoD”) regarding the transfer of [insert name of funds
(acronym)] pursuant to Section 632(b) and Chapter [___] of Part [___] of the Foreign Assistance Act of 1961, as
amended (“FAA”), the Purchaser Agency and DSCA hereby agree to amend said Agreement.
This amendment increases the agreement by [$X,XXX,XXX (Spell out dollar amount)] for a total of
[$X,XXX,XXX (Spell out dollar amount)] to fund [List requirements, e.g., Helicopter Training]

 Funds expire on: [DDMMYYYY]


 _________________________________________                _________________________________________
 (Requesting Officer’s Signature Block)                   [Name]
                                                          Director
                                                          Defense Security Cooperation Agency
                                                          U.S. Department of Defense


 Date: ________________________________                   Date: ________________________________

 Attachment:
 Funding Transfer Document

    C11.7.3. FAA, Section 632 Pseudo LOA. The USG uses a Pseudo LOA to track the sale of
defense articles and/or services (to include training and design and construction services) to a
Purchaser Agency under the authority of FAA, section 632. The Pseudo LOA itemizes the
defense articles and/or services included in the Purchaser Agency’s MOA. It is NOT signed by
the country and/or organization receiving the articles and/or services. The request, acceptance,
and funding of FAA, section 632 Pseudo LOAs is via the MOA (Figure C11.F8.). DSCA
(Operations Directorate) provides a copy of the MOA to the Implementing Agency with the
memorandum requesting the Implementing Agency prepare the Pseudo LOA.
        C11.7.3.1. FAA, Section 632 Pseudo LOA Preparation Timeframe. Pseudo LOAs are
categorized as “Group D” and will be processed according to the guidelines provided in Chapter
5, paragraph C5.4.2.
       C11.7.3.2. FAA, Section 632 Pseudo LOA Preparation. The Implementing Agency
develops an FAA, section 632 Pseudo LOA in DSAMS to allow execution of these programs
through existing Security Assistance automated systems. Pseudo LOAs follow the same LOA
preparation guidelines as FMS cases (see Chapter 5, paragraph C5.4.6.).




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        C11.7.3.3. FAA, Section 632 Pseudo LOA Format. LOA format guidance provided for
FMS cases in Chapter 5, Figure C5.F5. applies to FAA, section 632 Pseudo LOAs except as
identified in Figure C11.F10.
        Figure C11.F10. Unique Instructions for Preparing FAA, Section 632 Pseudo LOAs
     Unique Instructions for Preparing a Pseudo Letter of Offer and Acceptance for FAA, Section 632 Cases
       Case Identifier. For FAA, section 632 Pseudo LOAs the case identifier is composed of country code “S4”
1.     (FAA, section 632 Transactions), Implementing Agency code of the DoD Component providing the support,
       and a case designator assigned by DSCA (Strategy Directorate).
       Nickname Field. The country/organization receiving the support and the type of support (e.g., FAA, section
2.
       632) are identified in the “nickname” field on the Pseudo LOA.
       Purchaser’s Reference. The MOA between the Purchaser Agency and DSCA is entered in the “Based on”
3.
       field.
4.     Terms of Sale. The Term of Sale for all FAA, section 632 Pseudo LOAs is “Cash with Acceptance.”

          C11.7.3.4. Pricing of FAA, Section 632 Pseudo LOAs
           C11.7.3.4.1. Pricing FAA, Section 632 Pseudo LOAs – Non-Excess Procurement
Assets NOT To Be Replaced. Price equates to the sum of the most recent actual procurement
cost and modifications or improvements incorporated after production, adjusted for age or
condition, plus prorated overhaul cost. Payments are deposited into the Treasury Miscellaneous
Receipts Account.
            C11.7.3.4.2. Pricing FAA, Section 632 Pseudo LOAs – Non-Excess Procurement
Assets To Be Replaced. DoD budget and/or Future Years Defense Program (FYDP) must reflect
intent to acquire asset. Reimbursement is made at the estimated replacement cost, including the
contract or production costs of the article less an adjustment for age and condition of the item
being sold. See DoD 7000.14-R (reference (o)), Volume 11A, Chapter 1.
            C11.7.3.4.3. Pricing FAA, Section 632 Pseudo LOAs – Defense Working Capital
Funds (DWCF) Items. Payment is made at the DWCF standard price. The reimbursement is
credited to the DWCF.
             C11.7.3.4.4. Pricing FAA, Section 632 Pseudo LOAs – Services. Payment is for the
full costs incurred by the Department of Defense to provide such services including training.
Included in additional costs are civilian pay and funded benefits, but excluded are unfunded
civilian retirement and benefits and military pay. The payment is credited to the applicable
appropriation incurring the cost.
           C11.7.3.4.5. Pricing FAA, Section 632 Pseudo LOAs – Surcharges and Accessorials.
FMS surcharges and accessorial rates apply. DoD FMS resources support this effort and are
reimbursed through the normal FMS surcharges and accessorial accounts. Requests to deviate
from the application of these surcharges are sent to DSCA (Business Operations Directorate) for
approval.
           C11.7.3.4.6. Pricing FAA, Section 632 Pseudo LOAs – Contracts. Full contract costs
incurred for awarded contracts are charged to the FAA, section 632 Pseudo LOA.




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          C11.7.3.4.7. Pricing FAA, Section 632 Pseudo LOAs – Nonrecurring Costs (NC).
NC does not apply to FAA, Section 632 Pseudo LOAs. See DoD 7000.14-R (reference (o)),
Volume 11A, Chapter 1.
       C11.7.3.5. Additional FAA, Section 632 Pseudo LOA Information. The LOA Standard
Terms and Conditions DO NOT apply to FAA, section 632 Pseudo LOAs. Other notes that are
mandatory for FMS cases (e.g., Offsets, Unauthorized Use of Defense Articles) DO NOT apply
to FAA, section 632 Pseudo LOAs. Notes regarding inclusion of charges on the document (e.g.,
Administrative Surcharge and CAS notes) DO apply to these Pseudo LOAs. Unique notes
should be included on each Pseudo LOA to ensure readers can understand the program. In
addition to these customized notes, there are mandatory standard notes that must be included on
each FAA, section 632 Pseudo LOA: Authority for Sale – FAA, section 632 and Funds
Expiration, Purpose, and Availability. See Chapter 5, Table C5.T5. for exact note wording.
       C11.7.3.6. DSCA Coordination and Countersignature of FAA, Section 632 Pseudo
LOAs. All FAA, section 632 Pseudo LOA documents require DSCA countersignature (see
Chapter 5, paragraph C5.4.14.). The Implementing Agency posts the country acceptance
milestone in DSAMS after DSCA countersignature.
    C11.7.4. Transfer of FAA, Section 632 Funds. The signed MOA serves as the authority to
transfer funds from the purchaser agency to the FMS Trust Fund. DSCA (Business Operations
Directorate) sends a copy of the signed MOA to DFAS Indianapolis along with instructions to
collect the funds from the Purchaser Agency and to establish a separate holding account
associated with the FAA, section 632 Pseudo LOA. DSCA (Business Operations Directorate)
directs DFAS Indianapolis when to implement the case. DSCA monitors the obligation of funds
by the date set in the written request, directs the return of unobligated funds not required for the
provision of items or services, and notifies the Purchaser Agency of potential cost increases or
decreases.
    C11.7.5. FAA, Section 632 Pseudo LOA Reporting. The DSCA 1200 system is not used to
record FAA, section 632 Pseudo LOAs. DIFS distinguishes FAA, section 632 agreements from
other FMS agreements using the Pseudo LOA case designator. The Implementing Agency does
delivery reporting for these cases. DFAS Indianapolis applies the normal surcharges and
accessorial charges to the DoD delivery transactions, as done for FMS transactions. DSCA in
conjunction with the Implementing Agency and DFAS Indianapolis provides the Purchaser
Agency quarterly reports of program activities and any additional information or documentation
that the Purchaser Agency may request regarding expenditures and activities. This includes any
accounting or audit records concerning funds transferred under the agreement.
    C11.7.6. FAA, Section 632 Pseudo LOA Billing. DFAS Indianapolis submits the quarterly
DD 645 Bill or a report of costs incurred to DSCA (Business Operations Directorate). Upon
completion of the FAA, section 632 Pseudo LOA including termination of all contingent
liabilities (e.g., warranties, equitable adjustments, and claims), DSCA (Business Operations
Directorate) directs DFAS Indianapolis to return excess funds to the originating Purchaser
Agency account.




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                                                                       DoD 5105.38-M, October 3, 2003


C11.8. GOVERNMENT FURNISHED EQUIPMENT AND MATERIEL (GFE/GFM) SALES
AECA, section 30 (reference (c)) authorizes the USG to sell defense articles and defense services
to U.S. companies in connection with proposed direct commercial exports pursuant to the ITAR
(reference (n)). The Implementing Agency executes the functions conferred by AECA, section
30 (reference (c)) and may delegate the authority to the commanding officer or head of a
contracting activity of the Implementing Agency responsible for acquisition of the end item.
    C11.8.1. Who May Purchase Under AECA, Section 30? AECA, section 30 (reference (c))
sales may be made to a company incorporated in the United States who has an approved license
under the ITAR (reference (n)) if the contractor’s license is for final assembly or manufacture of
an end item or in the case of ammunition components, the contractor is using commercial
practices that restrict actual delivery directly to a friendly foreign country or international
organization. To be eligible, the U.S. company must intend to incorporate the item(s) or
service(s) into end items (or concurrent or follow-on support) to be sold to a friendly foreign
country or international organization.
    C11.8.2. What May Be Purchased Under AECA, Section 30? AECA, section 30 (reference
(c)) sales must meet the following criteria: any services provided must be performed in the
United States; the end item being procured must be for the armed forces of a friendly country or
international organization; the articles would be supplied to the prime contractor as GFE/GFM if
the end item were being procured for the use of the U.S. Armed Forces; and the articles and
services are available only from the USG sources or are not available to the prime contractor
directly from the U.S. sources at such times as may be required to meet the prime contractor’s
delivery schedule. Services may include transportation, installation, testing, or certification that
are directly associated with the sale. Services alone may not be provided.
       C11.8.2.1. AECA, Section 30 Sales from Stock. Unless approved by USD(P) in
coordination with the Under Secretary of Defense for Acquisition, Technology, and Logistics
(USD(AT&L)), sales are not authorized if they result in stocks dropping below the reorder point.
        C11.8.2.2. AECA, Section 30 Sales from Procurement. When procurement or
manufacture in Government-owned facilities is required, the Implementing Agency determines if
a sale shall be concluded. In determining production priorities, the Implementing Agency
considers existing requirements and schedules manufacture, allocation, and delivery on a first-in
first-out basis guided by DoD 4140.1-R (reference (cq) and related assignments of Force Activity
Designators (FADs) by the Chairman of the Joint Chiefs of Staff. The Director, DSCA resolves
questions of priority between two or more competing foreign requirements.
    C11.8.3. AECA, Section 30 Sales Format. A unique sales agreement is used by the USG for
the sale of defense articles and/or services to U.S. companies under the authority of AECA,
section 30 (reference (c)). The sales agreement includes the information outlined in Table
C11.T9.




                                                  520                                   CHAPTER 11
                                                                                 DoD 5105.38-M, October 3, 2003


                  Table C11.T9. AECA, Section 30 Sales Agreement Requirements

    Basic Descriptive
                                                General Provisions and/or Notes Required
      Information
                              1) The USG retains the right to cancel in whole or in part or to suspend
                                 performance at any time under unusual or compelling circumstances if the
Company Identity
                                 national interest so requires.
                              2) The USG provides no warranty or guarantee, either expressed or implied,
Items/Quantity                   regarding the item being sold.
                              3) The USG shall provide best efforts to comply with the delivery lead time
                                 cited, but incurs no liability for failure to meet an indicated delivery
Estimated Availability
                                 schedule.
                              4) The USG shall use its best efforts to deliver at the estimated price, but that
Source of Supply                 the purchaser is obligated to reimburse the USG for the total cost if it is
                                 greater than that price.
                              5) The item sold may be used only for incorporation into end items (or as
Estimated Price                  concurrent or follow-on support in conjunction with a sale of the end item)
                                 for export under an approved export license and may not be used for other
                                 purposes.
End Item Application (if
applicable)                   6) The purchaser renounces all claims against the USG, its officers, agents, and
                                 employees arising out of or incident to this agreement, whether concerning
                                 injury to or death of personnel, damage to or destruction of property, or other
End Item Purchaser               matters, and shall indemnify and hold harmless the USG, its officers, agents,
(country or international        and employees against any such claims of third parties and any loss or
organization)                    damage to USG property.
                              7) The U.S. company agrees to provide protection of classified information and
                                 requires that the agreement with the foreign Government provides protection
Number and date of the           of U.S. classified information.
munitions export license or
other DoS approval            8) The purchaser is responsible for any insurance desired and, when applicable,
                                 export customs clearance.
                              9) The purchaser is required to reimburse the USG for all costs incurred by the
                                 USG if the purchaser cancels the purchase agreement before item delivery.
                              10) Delivery is Free On Board (FOB) point of origin. The purchaser must
                                  arrange for continental U.S. (CONUS) transportation (except for sensitive or
                                  hazardous cargo that is normally shipped via the Defense Transportation
                                  System (DTS)).
                              11) Payment terms.
                                     a)   Sales of Articles from Stock. Total payment is required in advance
                                          for the full cost of any USG shipment.
                                     b) Sales of Articles or Services from Procurement, or Sales of Services
                                        from Resources on Hand. Payment is normally cash payable in full
                                        at the time the agreement is signed. Based on purchaser request, a
                                        payment schedule may be considered when full funding is not
                                        immediately required. When requested by the purchaser, the
                                        Implementing Agency, in coordination with the contracting officer,
                                        may negotiate a payment schedule that complies with the Security
                                        Assistance Management Manual (SAMM). Funds must be available
                                        prior to USG entering into a contract, submitting a MIPR, or making



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      Basic Descriptive
                                            General Provisions and/or Notes Required
        Information
                                      other obligations. Payment is equal to the full cost of the obligations
                                      plus reasonable uncertainties, such as costs which could be incurred
                                      should it become necessary to prematurely terminate the Sales
                                      Agreement.

        C11.8.3.1. Pricing of AECA, Section 30 Sales. Prices, accountability, and disposition of
collections shall be in accordance with DoD 7000.14-R (reference (o)), Volume 15, Chapter 7.
Administrative surcharges and accessorial charges are charged at the same rate as corresponding
FMS charges. Sales shall be in cash, with payment upon signature of the sales agreement by the
USG and U.S. company representatives. Payment in U.S. dollars shall precede procurement or
production action or, in cases of stock sales, delivery. Funds obligated for a reimbursable
procurement, internal production of articles, or provision of services may not exceed the cash
received from an authorized purchaser. If there is an increase in the cost, the purchaser is
required to make additional cash payments to fund the costs plus applicable surcharges. The
cash received must be sufficient to fund the replacement cost of articles shipped from DoD
stocks.
       C11.8.3.2. Planning Data. To allow planning and marketing, Implementing Agencies are
authorized to provide cost and delivery data to authorized potential purchasers in advance of
execution of a sales agreement. Such data are identified as estimates that are not binding on the
USG.
    C11.8.4. Records and Reporting. A central Implementing Agency record is maintained
showing the purchaser, item being sold, source (stock, DoD production, or procurement), cost
estimate or (if delivered) billed price, end item (if applicable), ultimate recipient (country or
international organization), and export license number and date or other DoS approval.
Information from this record is provided to DSCA upon request.
C11.9. INTERNATIONAL AGREEMENTS
The Department of Defense may enter into agreements with friendly and allied countries on the
basis of common goals to achieve mutual national security objectives. DoD Directive 5530.3
(reference (aa)) defines an international agreement as: “any agreement concluded with one or
more foreign Governments (including their agencies, instrumentalities, or political subdivisions)
or with an international organization, that is signed or agreed to by personnel of any DoD
Component, or by representatives of the DoS or any other department or agency of the USG;
signifies the intention of its parties to be bound in international law; and is denominated as an
international agreement or as a MOU, MOA, memorandum of arrangements, exchange of notes,
exchange of letters, technical arrangement, protocol, note verbale, aide memoire, agreed minute,
contract, arrangement, statement of intent, letter of intent, statement of understanding, etc. Table
C11.T10. is a summary of legal references that cover international agreements.




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                    Table C11.T10. International Agreements Legislation Summary

              Legislation                                                     Subject
  AECA, Section 27 (reference (c))
                                          Provides the authority to enter into cooperative projects with friendly
  10 U.S.C. 2341 - 2350b (reference       foreign countries
  (ce))
  AECA, Section 36(a) (reference
                                          Congressional Reporting of all coproduction agreements
  (c))
  AECA, Section 42(b) (reference          DoS to advise Congress of use of FMF to finance coproduction or licensed
  (c))                                    production in a foreign country
  1 U.S.C. 112b, (Case Act)
                                          Transmissions to Congress
  (reference (cr))

  22 CFR 181 (reference (cs))             Coordination and Reporting of International Agreements

  FAA, Section 517 (reference (b))        Designation of major non-NATO allies

    C11.9.1. When is a DoD Directive 5530.3 Agreement Required? In some instances, it is in
the U.S. interest to establish an international agreement before initiation of a commercial or USG
Security Assistance program. DSCA is responsible for determining whether a DoD Directive
5530.3 agreement for Security Assistance is necessary. The following are examples of scenarios
that may require a DoD Directive 5530.3 agreement:
        C11.9.1.1. The program is complex, it involves licensed production, or it is considered
sensitive (for example, classified data is released) by the USG or U.S. industry.
          C11.9.1.2. Delineation of responsibilities and authorities of the parties is required.
          C11.9.1.3. The country has requested, and provided rationale for, a separate agreement.
          C11.9.1.4. The Congress has mandated an international agreement be used.
    C11.9.2. International Agreement Format. DoD Directive 5530.3 agreements for Security
Assistance include standard provisions, some of which reflect the requirements of law or
regulation. These agreements may also include unique provisions reflecting the interests of the
involved parties. Therefore, the final content of each agreement is determined during
negotiations. A typical agreement for Security Assistance contains provisions on at least the
topics included in Table C11.T11.
         Table C11.T11. Sample Provisions Contained in DoD Directive 5530.3 Agreements
                          Sample Provisions Contained on DoD Directive 5530.3 Agreements
     1       The participants in the program and their obligations must be clearly stated.
             Scope of agreement, including any items and quantities to be produced in the United States and
     2
             authorized for production by the participating country.
     3       Terms and, when required, their definition.
             Export of items (see Chapter 3), including anticipated use of commercial or FMS transportation
     4       channels (see Chapter 7). Any DoD assistance in obtaining commercial export licenses or technical
             data belonging to U.S. companies may be defined.
     5       Authorization for use of technical data, usage limits, and restrictions on its transfer to third parties.



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                       Sample Provisions Contained on DoD Directive 5530.3 Agreements
    6     Any use of USG facilities shall be incorporated.
          Flowback, including provisions relative to the return to the United States of any technical improvements
    7     to transferred equipment or manufacturing processes. The USG must have the right to use the
          improvements without payment of any fees.
          Management, such as establishment of a joint project office to serve as the channel for exchange of
    8
          information.
          Configuration management, to ensure systems are produced to specifications (normally U.S. standard).
    9     The agreement provides for incorporation of engineering changes and modifications, and the procedures
          to manage the changes.
    10    Existing security arrangements.
    11    Customs, duties, and taxes. (This may show new or existing reciprocal arrangements.)
    12    Audit access and production validation.
          Third party transfer and end-use. This includes any production incorporating U.S. equipment or based
    13
          on U.S. information obtained under the program from any source.
          Reimbursement for applicable costs. The agreement should note that USG costs to support purchaser
    14    program management, FMS administrative fees, transportation, or other costs must be financed under
          FMS procedures.
          LOA/DoD Directive 5530.3 agreement precedence. The agreement should note that if a conflict exists
    15
          between the DoD Directive 5530.3 agreement and the LOA, the terms of the LOA takes precedence.
          Logistics Support. This may include items such as USG responsibilities for support or any
    16
          authorization for foreign production of spares, and any other pertinent requirements.
          Supplemental Compensation. A participant cannot impose a requirement for compensation that is not
    17
          in accordance with the agreement.
          Administrative provisions such as procedures to amend or change the agreement, identification of the
          effective national language, procedures for resolution of conflicts, specific duration (such as 10 years)
          before the agreement expires or must be renewed, procedures for early termination by either party,
    18
          provisions for certain elements of the MOU/MOA to remain in effect after termination (third party
          transfer, security, flowback, and limitations on any further weapon system production), and
          consideration of authorization to produce spare parts following termination.



   C11.9.3. Types of DoD Directive 5530.3 Agreements
       C11.9.3.1. DoD Directive 5530.3 Coproduction Agreements. Coproduction policy is
provided in DoD Directive 2000.9 (reference (ct)). Per DoD Directive 5530.3 (reference (aa)),
the Director, DSCA must provide written approval to enter into negotiations for coproduction
programs involving Security Assistance. Requests for DSCA authority must include a
description of the project as well as fiscal and legal memoranda. Discussions on coproduction
programs may be initiated by the Implementing Agency or by authorized representatives of
foreign Governments or international organizations. When partially or fully implemented
through DoD Directive 5530.3 agreements, the Implementing Agency recommendation is
forwarded to DSCA for authorization to proceed and includes the information shown in Table
C11.T12.




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 Table C11.T12. Information Required for DSCA Authorization of Coproduction Agreements
             Information Required for DSCA Authorization of Coproduction Agreements
       1   The program origin, nature, scope, and supporting rationale
           Implications of proposed technology transfer, including the scope and limitations of any
       2
           needed NDP-1 exceptions
       3   Impact on U.S. industry prime and subcontractors, and the views of these producers
       4   Impact on any other authorized foreign production of the same article
       5   Impact on the U.S. production base for the article

           C11.9.3.1.1. Classification of DoD Directive 5530.3 Coproduction Agreements. DoD
Directive 5530.3 agreements for coproduction of major defense equipment (MDE) are classified
“Confidential,” as a minimum, until the agreement is concluded. Programs implemented via
LOAs are subject to normal LOA classification guidance. (See Chapter 5.)
            C11.9.3.1.2. FMF-Financed Coproduction Program. AECA, section 42(b) (reference
(c)) requires the DoS to advise Congress prior to use of Foreign Military Financing (FMF) to
finance coproduction or licensed production in a foreign country. DSCA (Operations
Directorate) memoranda to the DoS advises of the country, type of proposed transaction (FMS
LOA or direct commercial sale), description of program, the extent of foreign production, and
impact on employment and production within the United States. Normally approval is staffed
concurrently with the related AECA, section 36(b) (reference (c)) notification. DSCA
(Operations Directorate) shall not approve release of an FMS LOA or FMF funding until the
DoS has advised Congress.
            C11.9.3.1.3. Monitoring Coproduction Agreements. USG monitoring requirements
are determined on a case-by-case basis. USG audits of production facilities may not be required
when there is clear evidence of commercial arrangements that are satisfactory to the Department
of Defense, such as when there is a direct agreement between a U.S. firm and the foreign
Government or firm that provides access to facilities and records. The need for direct USG
involvement in oversight may also be reduced when the U.S. firm has technical representatives
in the foreign plant or the U.S. retains control over critical technology or components essential to
the item being produced. Industry technical representatives are requested to provide information
to the Implementing Agency on foreign production including items and quantities, third party
transfers, and any non-compliance with provisions of the LOA or DoD Directive 5530.3
agreement. When USG monitoring is reduced based on industry arrangements, agreements are
structured to provide for USG monitoring once industry technical representatives are no longer
required. Whether or not USG monitoring and validation provisions exist, does not change the
Implementing Agency requirement to maintain program oversight and to assure required reports
are submitted. These factors must be considered in the initial DoD-industry program discussions
relative to program monitoring and access requirements. LOAs or DoD Directive 5530.3
agreements are structured to assure there are acceptable monitoring provisions for each program
and the Implementing Agency receives adequate data to prepare status reports. When USG
responsibilities can be satisfied only with access by USG personnel, a note must be included in
the LOA and the DoD Directive 5530.3 agreement. See Chapter 5, Table C5.T5. Coproduction
Reporting and/or Validation for the exact note wording.



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        C11.9.3.2. Cooperative Projects Under AECA, Section 27. AECA, section 27 (reference
(c)) permits partnership agreements in which the United States and one or more eligible countries
equitably share the costs and the results of jointly managed research, development, testing,
evaluation, or joint production (including follow-on support) projects, or of projects for
concurrent production in the United States and another eligible country of a jointly developed
defense article. In accordance with AECA, section 27(c), no USG military assistance and
financing may be used by any non-USG participant to provide its share of the cost of any such
project.
            C11.9.3.2.1. NATO Cooperative Projects. A NATO cooperative project is a jointly
managed arrangement, described in a written agreement among the parties, undertaken to further
the Rationalization, Standardization, and Interoperability (RSI) objectives of the armed forces of
NATO member countries. For NATO member country cooperative projects, AECA, section
36(b) (reference (c)) shall not apply to sales made under AECA, sections 21 and 22 (reference
(c)) and to production and exports made pursuant to cooperative projects under AECA, section
27 (reference (c)). AECA, section 36(c) (reference (c)) shall not apply to the issuance of licenses
or other approvals under AECA, section 38 (reference (c)) if such sales are made, such
production and exports ensue, or such licenses or approvals are issued as part of a cooperative
project.
                C11.9.3.2.1.1. Non-NATO Cooperative Projects. A non-NATO cooperative
project under AECA, section 27(j) (reference (c)) is authorized under the same general terms and
conditions as agreements with NATO countries. The foreign parties in such projects are friendly
foreign countries that are not members of NATO. The project provides for one or more of the
participants to equitably share with the United States the full costs of the cooperative project and
receive an equitable share of the results of the project to include research, development, testing,
evaluation, or joint production (with follow-on support) of certain defense articles; concurrent
production in the United States and in the country of another participant of a defense article
jointly developed; and U.S. procurement of a defense article or service from another member
country. For FMS that are made as a part of non-NATO cooperative projects and for licenses
issued under the authority of AECA, section 38 (reference (c)) as part of such cooperative
projects, the requirements of AECA, section 36(b) and (e) (reference (c)) apply.
            C11.9.3.2.2. Waiver of Charges for Cooperative Projects. AECA, section 27(e)(1)
(reference (c)) provides authorization to reduce or waive certain charges associated with
cooperative projects. Waiver or reduction of appropriate charges must be approved by the
Director, DSCA prior to conclusion of the cooperative project agreement, whether or not the
agreement commits to the waivers. Security Assistance funds may not finance the cost of any
AECA, section 27 (reference (c)) cooperative project. Proposals for AECA, section 27
(reference (c)) programs that rely in any manner on the FMS system are not offered to
participants unless the Director, DSCA has made an exception in writing. Proposals submitted to
DSCA shall include information on MOU terms regarding collection or waiver of surcharges or
levies.




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                C11.9.3.2.2.1. Waiver of Nonrecurring Costs (NC) for Cooperative Projects.
Participating countries in newly initiated cooperative projects for development with no use of
items previously developed with USG funds, do NOT incur NC charges since each participant
contributes its equitable share of the full cost of the project. DoD agreements for coproduction
and/or licensed production entered into after October 7, 1992 shall have no DoD NC charges
included unless international agreements exist to the contrary.
                C11.9.3.2.2.2. Waiver of FMS Administrative Charges for Cooperative Projects.
Normally, AECA, section 27 (reference (c)) programs are not implemented through the FMS
system and administrative surcharges are not applicable. When the FMS system (an LOA) is
used, the administrative surcharges are assessed. For sales pursuant to AECA, section 27(e)(1)
(reference (c)), if the FMS administrative surcharges are reduced or waived, AECA, section
27(e)(2) (reference (c)) prohibits using administrative surcharge funds from other AECA sales to
reimburse cost incurred by the USG for which the reduction or waiver was approved.
          C11.9.3.2.3. Implementation of Cooperative Projects. Authority to negotiate and
conclude cooperative agreements was delegated to USD(AT&L), with authority to re-delegate to
the MILDEPs.
    C11.9.4. Release of DoD Directive 5530.3 Security Cooperation Agreements. Since
international agreements involve matters that must be resolved on a governmental basis as part of
a broad program of cooperation, copies of DoD Directive 5530.3 agreements for Security
Assistance are not released to third parties unless required by the Freedom of Information Act,
other U.S. law, or as authorized by the parties to the agreement. They may be discussed with
representatives of appropriate U.S. industry to the degree necessary to obtain Congressional
reporting or other information. With the consent of the foreign party, these agreements may be
released to specific U.S. firms for implementation.
    C11.9.5. Monitoring of DoD Directive 5530.3 Security Cooperation Agreements. The
Implementing Agency monitors the terms and conditions of DoD Directive 5530.3 agreements
for Security Assistance (including those negotiated at OSD level and assigned to the
Implementing Agency) to ensure compliance by all parties. This is accomplished with the
assistance of other involved USG organizations as well as U.S. industry.
   C11.9.6. Responsibilities for International Agreements for Security Assistance.
Responsibilities for negotiating, managing, monitoring, etc. for international agreements for
Security Assistance is summarized in Table C11.T13.
  Table C11.T13. Responsibility Matrix for International Agreements for Security Assistance
 Organization                                          Responsibility
                Commitments are not made until OSD-level approval is obtained. Export license approvals that
                could impact the Agreement shall not be provided prior to completion of negotiations.
                Agreements are drafted consistent with DoD policy and negotiation and conclusion authorities
                are obtained and provisions are included to assure USG and foreign rights and obligations are
 Implementing
                defined.
 Agency
                Implementing Agency coordination is conducted and any required Congressional notification
                data is provided to DSCA.
                Copies of the concluded Agreement are provided to DSCA, the SCO, Defense Intelligence
                Agency (DIA), DoD General Counsel (original), State Department Legal Advisor/Treaty


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 Organization                                               Responsibility
                 Affairs, and other involved organizations.
                 Overall responsibility rests with the Implementing Agency program manager. For complex
                 programs, monitoring and implementation of individual aspects of the Agreement is the
                 responsibility of the cognizant functional area. Implementing arrangements shall identify
                 individual responsibilities.
                 Procedures are established to assure compliance with all elements of the Agreement.
                 Production facilities are visited, consistent with the provisions of the Agreement. During the
                 visits, U.S. personnel shall, as a minimum, review production records and validate production
                 and retransfer reports. Findings are recorded in a trip report and distributed to involved
                 agencies. Knowledgeable personnel may conduct the visits in conjunction with other regularly
                 scheduled visits. The DSCA is provided an information copy of any correspondence issued or
                 received relative to Agreement compliance.
                 Maintain data and report to DSCA information regarding coproduction and licensed production
                 programs.
                 For coproduction programs involving FMS, the Implementing Agency ensures appropriate
                 coordination with DSCA, furnishes technical and negotiating assistance, and performs
                 managerial and reporting functions.
                 Establish a point of contact within the regional directorates for specific Agreements (normally
                 the country director).
                 Receive, and staff within OSD, the DoC, and the DoS, draft Security Assistance Agreements
                 and Implementing Agency requests for authority to negotiate and conclude the Agreements.
 DSCA            Provide guidance on coproduction and other Security Assistance Agreements following any
                 necessary staffing within OSD and with DoS.
                 Staff and provide to Congress notifications required by legislation.
                 Initiate appropriate action within DoD and with DoS when issues of Agreement non-
                 compliance are identified.
                 Identify the individual to maintain contact with the Implementing Agency, be familiar with the
                 Agreement, and be responsible for monitoring status in country. Provisions shall be made for
 Security        continuity of the requirement after departure of the individual identified.
 Cooperation     Be responsive to requests for information from the program manager or DSCA.
 Organizations
 (SCOs)          Provide information on problems, including possible non-compliance.
                 Serve as the conduit for production status information from the country to the Implementing
                 Agency.
 Department of   Reviews proposed agreements to assess their commercial implications and possible effects on
 Commerce        the international competitive position of U.S. Industry.

    C11.9.7. Quarterly Report of Security Assistance Coproduction Agreements. Each
Implementing Agency maintains appropriate data and reports to DSCA (using Reports Control
Symbol (RCS): DSCA 1226) information regarding coproduction and licensed production
programs under its purview. Portions of the information are consolidated by DSCA and included
in the quarterly AECA, section 36(a) (reference (c)) report through the DoS to Congress.
Information for active and inactive coproduction programs, for which Agreements are concluded
but are not closed, are reported. Programs for which Agreements are not concluded and closed
programs are not reported. Negative reports are required.
       C11.9.7.1. Report Schedule. Each report is titled “Quarterly Report of Security
Assistance Coproduction Agreements” and is submitted according to the schedule shown in
Table C11.T14.



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        Table C11.T14. Quarterly Report of Security Assistance Coproduction Agreements
                                      Submission Dates
              Fiscal Year Quarter                  Period Covered                   Submission Date
             First Quarter               October 1 through December 31            January 31
             Second Quarter              January 1 through March 31               April 30
             Third Quarter               April 1 through June 30                  July 31
             Fourth Quarter              July 1 through September 30              October 31

        C11.9.7.2. Report Content – Active Programs. Active program reports include the title of
the agreement or name of the weapon system centered at the top, and the information shown in
Table C11.T15.


     Table C11.T15. Quarterly Report of Active Security Assistance Coproduction Agreements
           Description of Data Required for Active Security Assistance Coproduction Agreements
 1      Country, international organization, or foreign firm if the agreement is bilateral and the partner heads up an
        approved production group or consortium, identify the other members.
 2      Description of articles authorized for production.
 3      Estimated value of articles authorized to be produced.
 4      Estimated quantity of articles authorized to be produced.
 5      Authorized third country sales and description of third party transfer restrictions. Specify item and quantity
        for each third country, date of U.S. authorization, and status of deliveries. Identify source of information.
 6      Alternate measures to ensure compliance with third party transfer and production quantity restrictions (if
        applicable).
 7      Date of LOA and, if applicable, DoD Directive 5530.3 Agreement.
 8      Agreement expiration date. If the agreement has no expiration date, the projected termination date, not
        simply an event such as “completion of production”, should be furnished and identified as such.
                             Items 9 -- 13 begin on a separate page and are for internal use.
 9      Quantity produced during the reporting period, quantity produced to date.
 10     Incidents of agreement noncompliance during the reporting period. If incidents have occurred, provide a
        full accounting and identify source of information. If none, so state.
 11     Technology flowback and monetary return. Provide a summary of flowback requested or received during
        the reporting period and the status of its value. If none, state why and provide a statement of previously
        received or projected flowback, if appropriate. Include the total monetary return to the United States as a
        result of the agreement and actual expenditures in the United States to date.
 12     Summary of actions. Provide narrative summary of significant events for the period, such as meetings or
        program reviews, monitoring actions, support provided, significant problems, and the outlook for the
        coming year.
 13     Points of contact names, organizations, and telephones number of U.S. and foreign project officers who can
        provide additional information and interim updates.




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        C11.9.7.3. Report Content – Inactive Programs. Inactive program reports include the title
of the program or name of the weapon system centered at the top, and the information shown in
Table C11.T16.
  Table C11.T16. Quarterly Report of Inactive Security Assistance Coproduction Agreements
          Description of Data Required for Inactive Security Assistance Coproduction Agreements
                 Country, international organization, or foreign firm. If the agreement is bilateral and the partner
      1
                 heads up an approved production group or consortium, identify the other members.
      2          Date of LOA and, if applicable, DoD Directive 5530.3 Agreement.
      3          Reason program is inactive, vice closed.
      4          Estimated closure or termination date of the agreement.
                 Summary of action for the reporting period. Briefly explain agreement close-out actions,
      5          including monitoring actions that continue beyond agreement expiration. Provide narrative
                 summary of significant events for the period, if applicable.
                 Points of contact. Include the names, organizations, and telephone numbers of U.S. and foreign
      6
                 project officers.

C11.10. LEASES OF DEFENSE ARTICLES UNDER THE ARMS EXPORT CONTROL ACT
    C11.10.1. Definition and Purpose. Under AECA, chapter 6 (reference (c)), the President
may lease DoD defense articles to eligible foreign countries or international organizations for a
period not to exceed 5 years and a specified period of time required to complete major
refurbishment work prior to delivery. The President has delegated this authority to the
Department of Defense. There must be compelling foreign policy and national security reasons
for providing such articles on a lease basis and the articles must not be needed for public use at
the time. Leases may provide defense articles for testing purposes, assist countries in
determining whether to procure the article, allow the USG to respond to an urgent foreign
requirement, or provide for other purposes as approved by DSCA (Programs and Strategy
Directorates). Table C11.T17. summarizes the lease program legal references.
                              Table C11.T17. Lease Legislation Summary
                       Legislation                                             Subject
    AECA, Chapter 6 (reference (c))                       Lease authority, limitations, and terms
    AECA, Section 62 (reference (c))                      Congressional Notification
    AECA, Section 63(a) (reference (c))                   Legislative Review
    International Narcotics Control Act of 1990,
                                                          Leases of aircraft to Andean countries for
    Section 3(g) (Public Law No. 101-623) (reference
                                                          counternarcotics purposes
    (cw))
    10 U.S.C.7307 (reference (co))                        Ship leases (unique requirements)

    C11.10.2. Who Can Lease Defense Articles? Defense articles may be leased to a country or
international organization if that country and/or organization is eligible for FMS purchases. See
Chapter 4, Table C4.T2. for a list of eligible countries and/or organizations.




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    C11.10.3. What Can Be Leased? The President may lease defense articles from DoD stock
to eligible foreign countries or international organizations if: there are compelling foreign policy
and national security reasons for providing such articles on a lease basis rather than a sale; the
articles are not needed for public use (for the time); and the effects of the lease on the national
technology and industrial base are considered; particularly the extent, if any, to which the lease
reduces the opportunity of the national technology and industrial base to sell new equipment to
the lessee.
        C11.10.3.1. Ship Leases. Ship leases are authorized under separate, specific legislation
as required by 10 U.S.C. 7307 reference (co). AECA, Chapter 6 (reference (c)) requirements
also apply to ship leases unless the separate legislation expressly provides otherwise.
        C11.10.3.2. Counternarcotics Aircraft to Andean Countries. The International Narcotics
Control Act of 1990 (Section 3(g) of Public Law No. 101-623 (reference (cw))) authorizes leases
of aircraft to Andean countries for counternarcotics purposes.
        C11.10.3.3. Prohibition on Leasing Under 10 U.S.C. 2667. DoD defense articles may not
be leased to foreign countries or international organizations under the authority of 10 U.S.C.
2667 (reference (cv)).
    C11.10.4. Lease Preparation and Format. All unclassified leases are prepared using DSAMS.
Certain organizations are authorized to prepare leases. See Chapter 5, Table C5.T2. for a list of
these organizations. These organizations, known as Implementing Agencies are responsible for
preparing leases in accordance with this manual. Classified leases are prepared outside of
DSAMS using the same format.
        C11.10.4.1. Lease Duration. Leases may be written for a maximum of 5 years and a
specified period of time required to complete major refurbishment work prior to delivery.
Leases may include multiple items with different lease duration periods. The shortest lease
period is 1 month and the longest lease period is 60 months. Leases shall provide that, at any
time during the lease period, the USG may terminate the lease and require the immediate return
of the defense article(s). Leases of less than 5 years may be extended via an Amendment but the
total period under a specific lease may not exceed 5 years plus the time needed for
refurbishment. Subject to receipt of any initial deposit required, the lease period begins on the
date shown at the beginning of the lease, unless the period is otherwise specified within the terms
and conditions. If the purchaser signs the lease after the proposed starting date, the lease must be
amended to show the actual lease start date and any payment adjustments necessary on the
Schedule A.
        C11.10.4.2. Lease Format. The lease format including sample data and instruction for
preparation are provided in Figures C11.F11. through C11.F15. (at the end of this section).
Information that is not part of the basic format is bracketed for emphasis. This format may not
be altered unless special circumstances require an exception authorized by DSCA (Programs and
Strategy Directorate). Additional provisions may be added to a lease when appropriate and with
concurrence of the Implementing Agency’s legal office and DSCA. Classified leases are
prepared outside of DSAMS using the same format.




                                                  531                                   CHAPTER 11
                                                                       DoD 5105.38-M, October 3, 2003


        C11.10.4.3. Lease Identification. The Implementing Agency, using the Defense Security
Assistance Management System (DSAMS), assigns a unique designator to each lease. The lease
designator is composed of the Country Code, the Implementing Agency code, and a 3-position
code assigned by the Implementing Agency. The lease designator is included on each lease
page, including schedules, appendices, and accompanying documents. FMS cases associated
with leases must reference the lease designator(s).
   C11.10.5. Lease Pricing
        C11.10.5.1. Rental Payment. The lessee must agree to pay in U.S. dollars all costs
incurred by the USG in leasing articles, including reimbursement for depreciation (rent) of
articles while leased. The rental payment is calculated in accordance with DoD 7000.14-R
(reference (o)), Volume 15, Chapter 7. Rental payments do not include an administrative charge.
         C11.10.5.2. Replacement of Lost and/or Damaged Items. The lessee must agree to pay
the costs of restoration or replacement if the articles are lost, damaged, or destroyed while leased.
In this case, the customer is charged the replacement cost (less any depreciation) if the United
States intends to replace the articles or the actual article value (less any depreciation) if the
United States does not intend to replace the articles. These charges are recouped under an FMS
transaction via the LOA.
         C11.10.5.3. Payment Schedules. Schedule A of each lease identifies the replacement
costs of the item(s) being leased and the schedule for rental payment due to the USG. The
payment schedule is established on a quarterly billing cycle, compatible with the FMS billing
cycle. If the quarterly cycle does not provide for payment prior to the effective date of the lease,
an initial deposit is required to assure that payment is received in advance of the month in which
rental is incurred. Billings to the foreign lessee are based on this schedule of payments and are
included on a separate DD Form 645 with the country’s quarterly FMS billing statement. The
Implementing Agency assures that payment schedules are updated for any extensions, delivery
schedule changes, or other Amendments, that may result in a change to the lease value or
schedule of payments. DFAS deposits receipts from lease rental payments in the Miscellaneous
Receipts Account 3041 (FMS Recoveries, DoD Lease Costs) in accordance with the Treasury
Financial Manual, Supplement to Volume 1.
        C11.10.5.4. Use of FMF or Military Assistance Program (MAP) Merger Funds. FMF or
MAP funds cannot be used for lease rental payments. FMF or MAP Merger funds may be used,
when authorized by DSCA, for LOAs for services associated with a lease. FMF funds may be
used for leases of aircraft to Andean countries for counternarcotics purposes under the
International Narcotics Control Act of 1990. In such instances, the total lease cost (including
any renewals) is an initial, one-time payment of an amount equivalent to the aircraft price as if it
were sold on an LOA. Questions regarding proper sources of funding for leases should be
directed to DSCA (Business Operations, Programs, and Strategy Directorates).
       C11.10.5.5. Exceptions to the Payment of Depreciation Costs. The following types of
leases may be considered for no-rent leasing. DSCA must authorize the exception prior to the
Implementing Agency notifying a potential lessee that a lease under these terms is available.
            C11.10.5.5.1. Leases for purposes of cooperative research or development, military
exercises, or communications or electronics interface projects may be written at no-rent.


                                                  532                                   CHAPTER 11
                                                                       DoD 5105.38-M, October 3, 2003


            C11.10.5.5.2. The President may waive reimbursement of depreciation for any
defense article(s) that has passed three-quarters of its normal service life if he or she determines
that to do so is important to the national security interests of the United States. This waiver
authority has been delegated to the Director, DSCA in accordance with the provisions of DoD
Directive 5105.65 (reference (a)). When requesting this waiver, the Implementing Agency must
include the following information: a certification letter that the items are beyond three-quarters
(75 percent) of their service life, a spreadsheet showing how replacement costs were calculated, a
spreadsheet showing what the depreciation charges would normally be; if applicable, a
spreadsheet showing how partial depreciation charges were calculated, and a copy of any prior or
related waivers previously granted.
            C11.10.5.5.3. Leases made in exchange with the lessee for a lease on substantially
reciprocal terms of defense articles for the Department of Defense may be leased at no-rent. In
these cases, the President submits a detailed notification for each lease to the Committee on
Foreign Affairs (Committee on International Relations) and the Committee on Appropriations of
the House of Representatives; and the Committee on Foreign Relations and the Committee on
Appropriations of the Senate. This waiver authority is exercised only during the current fiscal
year and only with respect to one country, unless Congress provides otherwise. (The preceding
sentence does not constitute authorization of appropriations for payments by the United States
for leased articles.)
    C11.10.6. Congressional Notification Requirements. AECA, section 62 (reference (c))
requires written certification from the President to the Speaker of the House of Representatives,
the Chairman of the Committee on Foreign Relations of the Senate, and the Chairman of the
Committee on Armed Services of the Senate before entering into or renewing a lease agreement
for a period of 1 year or longer. The certification must be transmitted not less than 15-calendar
days before agreements with NATO, NATO member countries, Australia, Japan, the Republic of
Korea, or New Zealand and not less than 30-calendar days before agreements with all other
countries or organizations. The certification includes: the country or international organization
to which the defense article is to be leased; the type, quantity, and value (in terms of replacement
cost) of the defense article to be leased; the terms and duration of the lease; and the justification
for the lease, including an explanation of why the defense article is being leased rather than sold.
AECA, section 62(b) (reference (c)) authorizes waiver of the Congressional Notification for
leases if the President states in his or her certification that an emergency exists that requires the
lease be entered into immediately in the interest of U.S. national security. The certification must
include a detailed justification with a description of the emergency circumstances and a
discussion of the national security interests involved. This authority is reserved to the President
for his or her exercise only. In the event of such an emergency, DSCA provides instructions to
the Implementing Agency.
   C11.10.7. Title of Leased Items. Title does not transfer for leased items.
   C11.10.8. Lease Process. Table C11.T18. summarizes the lease process.


                                  Table C11.T18. Lease Process
      Step                                               Action



                                                  533                                   CHAPTER 11
                                                                                 DoD 5105.38-M, October 3, 2003


     Step                                                      Action
       1
   Purchaser       An eligible foreign country or international organization identifies a requirement and submits
  Request for      an LOR.
    Leases
                   The Implementing Agency determines if a lease is a viable option. The Implementing Agency
                   determines if the items are needed for public use during the proposed lease period. DSCA
                   (Operations Directorate) should be consulted at this time.
      2            With DSCA approval, the Implementing Agency responds to the country/organization stating
 Responses to      whether or not the equipment is available and if a lease is an available option. No actual offer
Lease Requests     may be made until the appropriate approvals/notifications are complete.
                   If the Implementing Agency recommends application of an exception to a customer
                   reimbursing depreciation costs, the Implementing Agency must provide justification and
                   receive authorization from DSCA before advising the customer of the exception.

      3            The Implementing Agency prepares lease documents in DSAMS in accordance with Figures
                   C11.F11. through C11.F15. The lease package consists of: the lease agreement with all
 Implementing      terms/conditions and payment schedule (Schedule A), the determination of compelling foreign
Agency Prepares    policy and national security interests and public use need, a forwarding memorandum, and, if
    Lease          required, Congressional Notification certification.
      4            The Implementing Agency coordinates the lease package within its Agency. The
 Implementing      Implementing Agency must screen all lease items for MTCR (see Chapter 3). Once the
   Agency          Implementing Agency has reviewed/coordinated on the lease package, the “MILSGN”
Coordinates the    milestone is entered into DSAMS by the Implementing Agency. This milestone automatically
    Lease          sets the lease status to “Proposed.”
                   For leases that are less than 1 year in duration, the Implementing Agency submits the lease
                   determination and forwarding cover memorandum to DSCA (Programs Directorate)
                   electronically for countersignature. Lease packages for countersignature must be submitted to:
       5
                   Lease Program Manager (PGM/BPC), Defense Security Cooperation Agency, 201 12th Street
 Implementing      South, Suite 203, Arlington, VA 22202-5408
Agency Submits
                   For leases that are 1 year or longer in duration, the Implementing Agency submits the lease,
Lease Package to
                   determination, Congressional Notification certification, and forwarding cover memorandum to
     DSCA
                   DSCA (Programs Directorate) electronically for countersignature. Lease packages for
                   countersignature must be submitted to: Lease Program Manager (PGM/BPC), Defense
                   Security Cooperation Agency, 201 12th Street South, Suite 203, Arlington, VA 22202-5408
       6           DSCA (Programs Directorate) coordinates the lease package within DSCA, OSD (Regional
    DSCA           Offices) and with the DoS.
  Coordinates      If the lease is for less than 1 year in duration, Go to Step #8.
 Lease Package
      7            DSCA (Programs Directorate) prepares the AECA, section 62(a) report to Congress. All
DSCA Prepares      documents are coordinated with OSD (Regional Offices), DoS, and DSCA before the Director,
Congressional      DSCA signs the notifications. For leases that require Congressional Notification, an advance
 Notification      copy of the unsigned lease may be provided to the customer.
        8          Upon completion of coordination and the Congressional Notification period (if required),
DSCA Signs the     DSCA (Programs Directorate) submits the lease determination to the Director, DSCA for
      Lease        signature. After signature, DSCA enters the “DCSGN” milestone in DSAMS. This milestone
 Determination     automatically sets the lease status to “Offered” and posts “DSCA Approved” and the date of
and Countersigns   the DCSGN milestone in the countersignature block. DSCA provides a copy of the signed
    the Lease      Determination to the Implementing Agency.
      9
                   Upon receipt of the “DCSGN” milestone, the Implementing Agency signs the lease document
 Implementing      and sends it to the country for review/signature.
 Agency Sends


                                                        534                                          CHAPTER 11
                                                                                    DoD 5105.38-M, October 3, 2003


       Step                                                       Action
 Lease to Country
       10           The customer signs the lease and sends any required Initial Deposit to DFAS Indianapolis. If
    Customer        the purchaser signs the lease after the proposed starting date, the lease must be amended to
   Acceptance       show the actual lease start date and any payment adjustments necessary on the Schedule A.
      11            The Implementing Agency assures that the initial deposit (if required) has been received by
     Lease          DFAS. After receipt of the deposit the lease is implemented. DFAS receives DSAMS
 Implementation     Management Flags when a lease moves to “Offered” status and “Implemented” status.
                    The Implementing Agency or DSCA may require a certificate of delivery (Figure C11.F16.)
                    when a leased item(s) is provided to the lessee. The Implementing Agency is responsible for
                    tracking and monitoring the lease to ensure conditions of the lease agreement are followed.
                    These responsibilities include (but are not limited to):
                          Maintain a record of all items including associated tools, ground support equipment
                         and other materiel to be recovered at the end of the lease
                          Ensure monitoring of the defense articles during the period of the lease
                          Advise DSCA of non-compliance by the lessee
       12                 Ensure that the appropriate rental payment schedule is maintained
 Lease Execution          Ensure that all related costs are recovered under FMS procedures
                          Report the status of each lease on a quarterly basis
                          Ensure that prior to lease expiration the lease is either being prepared properly for
                         closure, extended via Amendment, or if it has reached the 60-month limit, renewed in the
                         form of a new lease
                          Ensure that the leased materiel is returned by the lessee
                          Ensure proper disposition of the defense article(s) upon expiration or termination of
                         the lease and restoration to its original condition, in accordance with the terms of the lease
                    DFAS Indianapolis is responsible for collecting rental fees and delivery reporting.
                    The Implementing Agency will enter the delivery and equipment return dates in DSAMS.
       13           When all required data has been entered, DSAMS automatically notifies DFAS Indianapolis
  Lease Closure     that the lease is ready for closure. DFAS Indianapolis will reconcile the financial information
                    and close the lease in DIFS, which will then automatically close the lease in DSAMS.

    C11.10.9. Lease Renewal. Leases may be renewed. The same procedures as those outlined
in paragraph C11.10.8. for new leases apply.
   C11.10.10. Lease Terminations. Any proposals to terminate a lease before its expiration date
must be coordinated with DSCA.
     C11.10.11. Lease Amendments. Lease Amendments (Figure C11.F18.) may be used to
extend or change existing leases. Such changes may include variations or updates to payment
schedules, Schedule A items, or periods of performance; however, a Lease Amendment may not
be used to add new or additional items to the Schedule A with an effective date different from
the effective date of the lease. An increase in scope in this way requires a new lease. Each
Amendment includes the original lease designator and undergoes the same staffing process as the
original lease. As with original leases, a cover memorandum is included when the draft lease
Amendment is electronically provided to DSCA for coordination and countersignature. If a lease
for less than 1 year is amended so that the total period of the original lease and the
Amendment(s) equals or exceeds 1 year, the Amendment must be notified to the Congress before
it can be offered.



                                                          535                                           CHAPTER 11
                                                                      DoD 5105.38-M, October 3, 2003


    C11.10.12. Lease Reporting Requirements. Each Implementing Agency is responsible for
updating the status of each lease under its cognizance via DSAMS. The update is made by
posting the “Action Taken on Lease” (comment code ACT) in the “Lease Text/Comments” field
of the “Lease” tab of the “Lease Detail.” Additionally, the Implementing Agency must verify
the accuracy of payments and notify DFAS of any financial issues when updating their leases in
DSAMS. The Implementing Agency electronically notifies DSCA (Programs Directorate) that
their leases have been updated not later than 30 days after the end of each quarter. DSCA then
generates a report for each Implementing Agency in DSAMS.
    C11.10.13. LOAs for Services Associated With a Lease. LOAs are not used for the lease of
defense articles. However, an LOA can be used for costs incurred by the USG incident to the
lease including but not limited to: restoration and/or replacement as a result of damage, loss or
destruction; packing, crating, handling, and transportation (PCH&T); and the sale of associated
articles and services, including refurbishment of the defense article(s) required prior to, during,
or after the lease period. These costs are not to be included in the lease and the lease shall not
remain open (valid) past the associated LOA expiration date. The associated LOA designator is
included in General Provision 12 and Schedule A of the lease. Also, a note on the LOA (Chapter
5, Table C5.T5.) identifies the associated lease designator.




                                                 536                                   CHAPTER 11
                                                                                      DoD 5105.38-M, October 3, 2003


                             Figure C11.F11. Lease Forwarding Memorandum

MEMORANDUM FOR: DIRECTOR, DEFENSE SECURITY COOPERATION AGENCY
(ATTN: PROGRAMS DIRECTORATE)
SUBJECT:           Lease to [insert Country or International Organization] Under the Authority of the AECA,
                   Chapter 6; [insert Lease Designator]
Attached is a draft lease agreement (Attachment 1) for your approval and countersignature; and a Determination
(Attachment 2) for your signature. These enclosures provide for the lease of [insert article(s)] to the [insert country
or international organization].


The [insert DoD Component] considers these defense articles are not needed for public use for the duration of the
lease.


This lease contains support equipment that includes MTCR controlled items:
            Yes ___ No ___


If yes, a list of possible MTCR controlled items has been sent to DSCA (Programs Directorate/Weapons Division)
on [insert date] and a copy is attached. The equipment has been checked by a qualified reviewer and is MTCR
compliant:
         Yes ___ No ___


Lease rather than sale of the identified defense article(s) is required for the following reason(s):
    1.
    2.
    3.
         Recommend you approve the draft lease agreement and sign the Determination.


Attachments
As stated




                                                             537                                         CHAPTER 11
                                                                                      DoD 5105.38-M, October 3, 2003



                                         Figure C11.F12. Sample Lease


                              Lines and data are included for illustration purposes only.


                                LEASE OF MAVERICK SUPPORT EQUIPMENT
                                                      BETWEEN
                                     THE UNITED STATES GOVERNMENT
                                                          AND
                                      THE GOVERNMENT OF BANDARIA
                                                      BN-Q-ZAA




     This LEASE, made as of 01 Oct 2003, between the United States Government (hereinafter called the "Lessor
Government") represented by its DSCA and the Government of Bandaria, (hereinafter called the "Lessee
Government") represented by its LTC Morgan, Embassy of Bandaria.
       WITNESSETH
      WHEREAS, The Lessor Government has determined that the twenty four month lease of AGM-65-G Missile
Navigational System Test Set and, if applicable, all associated nonexpendable support equipment as listed in
Schedule A of this lease (including but not limited to tools, ground support equipment, test equipment, and
publications) (hereinafter referred to as the "Defense Articles") are not for the time needed for public use, and
       WHEREAS, The Lessor Government has determined that there are compelling foreign policy and national
security reasons for providing such Defense Articles on a lease basis rather than on a sales basis under the Arms
Export Control Act, and
      WHEREAS, The Lessor Government has considered the effects of the lease of the articles on the technology
and industry base, particularly the extent, if any, to which the lease reduces the opportunity of entities in the national
technology and industrial base to sell new equipment, and
       WHEREAS, This lease is made under the authority of Chapter 6 of the Arms Export Control Act,
       NOW THEREFORE, The parties do mutually agree as follows:
       1. In consideration of a rental charge as indicated in Schedule A, and the maintenance and other obligations
assumed by the Lessee Government, the Lessor Government hereby leases to the Lessee Government and the Lessee
Government hereby leases from the Lessor Government the Defense Articles for the period of twenty four (24)
months commencing on the date first above written (unless otherwise agreed under terms of this lease) and under the
terms and conditions set forth in the General Provisions hereto annexed.
       2. The Lessor Government shall deliver the Defense Articles to the Lessee Government at such time and
place as may be mutually agreed upon. Such delivery may be evidenced by a certificate of delivery.
       IN WITNESS WHEREOF, Each of the parties has executed this lease as of the day and year first above
written, unless otherwise agreed under terms of this lease.




                                                             538                                           CHAPTER 11
                                                            DoD 5105.38-M, October 3, 2003


                   Figure C11.F12. Sample Lease (continued)




 THE GOVERNMENT OF BANDARIA                  THE UNITED STATES GOVERNMENT

BY: _______________________________          BY: _______________________________

___________________________________          ___________________________________

           (Typed Name)                                 (Typed Name)

___________________________________          ___________________________________

              (Title)                                      (Title)

___________________________________          ___________________________________

              (Date)                                       (Date)

                                                    COUNTERSIGNATURE

                                             BY: _______________________________

                                             ___________________________________

                                                        (Typed Name)

                                             ___________________________________

                                                           (Title)

                                             ___________________________________

                                                           (Date)




                                                                             BN-Q-ZAA B
                                                                          Page 2 of 6 pages




                                       539                                   CHAPTER 11
                                                                                      DoD 5105.38-M, October 3, 2003


                                 Figure C11.F12. Sample Lease (continued)

                                             GENERAL PROVISIONS
1. Operations and Use.
    a. Except as may be otherwise authorized by the Lessor Government and except for the purposes of transfer
    from and return to the Lessor Government, the Lessee Government shall keep the Defense Article in its own
    possession, custody, and control. The Lessee Government shall not transfer title to or possession of the Defense
    Articles to anyone not an officer, employee, or agent of the Lessee Government and shall not permit any
    encumbrance or other third party interest in the defense articles.
    b. The Lessee Government shall, except as may be otherwise mutually agreed in writing, use the items leased
    hereunder only:
         (1) For the purposes specified in the Mutual Defense Assistance Agreement, if any, between the Lessor
         Government and the Lessee Government;
         (2) For the purposes specified in any bilateral or regional defense treaty to which the Lessor Government
         and Lessee Government are both parties, if subparagraph (1) of this paragraph is inapplicable.
         (3) For internal security, individual self-defense, and/or civic action, if subparagraphs (1) and (2) of this
         paragraph are inapplicable.
    c. To the extent that any Defense Articles may be classified by the Lessor Government for security purposes,
    the Lessee Government shall maintain a similar classification and employ all measures necessary to preserve
    such security, equivalent to those employed by the Lessor Government, throughout the period during which the
    Lessor Government may maintain such classification. The Lessor Government will use its best efforts to notify
    the Lessee Government if the classification is changed.
2. Initial Condition. The Defense Articles are leased to the Lessee Government on an ''as is, where is" basis without
warranty or representation concerning the condition or state of repair of the Defense Articles or any part thereof or
concerning other matters and without any agreement by the Lessor Government to alter, improve, adapt, or repair
the Defense Articles or any part thereof
3. Conditioning and Transfer Cost. The Lessee Government shall bear the cost of rendering the Defense Articles
operable and transferable and of transferring the Defense Articles from the United States or other point of origin and
back to the place of redelivery. In the event the Defense Articles are transported by vessel, only U.S. flag vessels
may be used, unless waived by the Lessor Government.
4. Inspection and Inventory. Immediately prior to the delivery of the Defense Articles to the Lessee Government, an
inspection of the physical condition of the Defense Articles and an inventory of all related items may be made by the
Lessor Government and the Lessee Government. A report of the findings shall be made which shall be conclusive
evidence as to the physical condition of said Defense Articles and as to such items as of the time of delivery. A
similar inspection, inventory, and a report may be made by the Lessor Government upon the termination or
expiration of this Lease. The findings of that report shall be conclusive evidence as to the physical condition of the
Defense Articles and as to such items as of the date of termination or expiration of this Lease. At the election of the
Lessor Government, the Lessee Government at its own cost shall either promptly correct any deficiency or rebuild,
replace, or repair any loss of or damage to the Defense Articles or compensate the Lessor Government for the
restoration or replacement value (less any depreciation in the value as determined by the Lessor Government) of
such correction, rebuilding, replacement, or repair. At the Lessor Government's choice, the Lessee Government at its
own cost will remove any alterations or additions to the Defense Articles or pay the Lessor Government the cost of
such removal, as determined by the Lessor Government. In the absence of removal by the Lessee Government, title
to any such alterations or additions shall vest in the Lessor Government.




                                                                                                          BN-Q-ZAA B
                                                                                                       Page 3 of 6 pages



                                                             540                                           CHAPTER 11
                                                                                     DoD 5105.38-M, October 3, 2003


                                 Figure C11.F12. Sample Lease (continued)

5. Maintenance. The Lessee Government shall maintain the Defense Articles in good order, repair, and operable
condition and except as provided in paragraph four, shall upon expiration or termination of this Lease return the
Defense Articles in operable condition and in as good condition as when received, normal wear and tear excepted.
6. Risk or Loss. All risk or loss of or damage to the Defense Articles during the term of this Lease and until their
return to the place of redelivery shall be borne by the Lessee Government.
7. Indemnification. The Lessee Government renounces all claims against the Lessor Government, its officers,
agents, and employees arising out of or incidental to transfer, possession, maintenance, use, or operation of the
Defense Articles or facilities and will indemnify and hold harmless the Lessor Government, its officers, agents, and
employees or any such claims of third parties and will pay for any loss or damage to Lessor Government property.
8. Alterations. The Lessee Government shall not make any alterations or additions to the Defense Articles without
prior consent of the Lessor Government. All such alterations or additions shall become the property of the Lessor
Government except items paid for by the Lessee Government, which can be readily removed without injury to the
Defense Articles and are removed by the Lessee Government prior to redelivery of the Defense Articles. As a
condition of its approval of any alteration or addition, the Lessor Government may require the Lessee Government
to restore the Defense Articles to their prior condition.
9. Termination. This Lease may be terminated without cost to the Lessor Government:
    a. By mutual agreement of the parties;
    b. By the Lessee Government on 30-days written notice; or
    c. By the Lessor Government at any time.
The Lessee Government shall immediately return the leased Defense Articles at the direction of the Lessor
Government. Termination will be subject to the Lessee Government's residual responsibilities hereunder (such as,
duty to return leased Defense Articles promptly, to pay costs required hereunder, and to indemnify and hold
harmless the Lessor Government).
10. Place of Redelivery. Upon expiration or termination of this lease, the Defense Articles shall be returned to the
Lessor Government at Kryst-Mallett Air Force Station, Harris, Pennsylvania, or as mutually agreed.
11. Title. Title to the Defense Articles shall remain in the Lessor Government. The Lessee Government may,
however, place the Defense Articles under its Flag, or display its national insignia when appropriate.
12. Reimbursement for Support. The Lessee Government will pay the Lessor Government for any services,
packing, crating, handling, transportation, spare parts, materiel, or other support furnished for the Defense Articles
by the Lessor Government pursuant to a Letter of Offer and Acceptance under the Arms Export Control Act. (FMS
Case BN-Q-BMB applies).
13. Covenant Against Contingent Fees. The Lessee Government warrants that no person or selling agency has been
employed or retained to solicit or secure this Lease upon an agreement or understanding for a commission,
percentage, brokerage, or contingent fee.
14. Officials Not to Benefit. No members of or Delegate to Congress of the United States, or Resident
Commissioner of the United States shall be admitted to any share or part of this Lease or to any benefit that may
arise there from.
15. Proprietary Rights. The Lessee Government will ensure, by all means available to it, protection of proprietary
rights in any Defense Article and any plans, specifications, or information furnished, whether patented or not.




                                                                                                         BN-Q-ZAA B
                                                                                                      Page 4 of 6 pages




                                                            541                                          CHAPTER 11
                                                                                     DoD 5105.38-M, October 3, 2003


                                 Figure C11.F12. Sample Lease (continued)

16. Reports. (Note: Any testing of articles and/or services provided under this lease must be specifically authorized
by the lease. Lessee testing is subject to limitations stated in the lease. Authority to test does not excuse the Lessee
from compliance with all terms and conditions of the lease.) When the Lessee Government performs tests and
evaluations on the leased Defense Articles and prepares a final report of the resulting data to be released to a third
party, the Lessee Government will allow the Lessor Government to observe the test and evaluation and to review the
report. The Lessee Government will obtain Lessor Government approval of any release to a third party.
17. Cost of Lessor Government. The Lessee Government agrees to pay in United States dollars all costs incurred by
the Lessor Government in leasing the Defense Articles covered by this Lease including, without limitation,
reimbursement for depreciation of such Defense Articles while leased. The Lessee Government also agrees to pay
the costs of restoration or replacement, less any depreciation in the value during the term of the lease, to the Lessor
Government under the Lessor Government's foreign military sales procedures. The rental charge shown in Schedule
A is based on costs identified at the time of signature of this Lease and does not relieve the Lessee Government from
liability for other costs in accordance with the provisions of this Lease.
18. Distribution. Copies of the accepted Lease will be distributed by the Lessee Government as follows:
    a. Original   DSCA (Operations Directorate)
    b. Copy                DSCA (Strategy Directorate)
    c. Copy                DSCA (Business Operations Directorate)
    c. Copy                DFAS Indianapolis
    d. Copy                SCO Bandaria




                                                                                                         BN-Q-ZAA B



                                                            542                                          CHAPTER 11
                                                                                      DoD 5105.38-M, October 3, 2003


                                                                                                    Page 5 of 6 pages

                                 Figure C11.F12. Sample Lease (continued)

                              Lines and data are included for illustration purposes only.

                                           SCHEDULE A
                                  TO LEASE AGREEMENTB ETWEEN
                           THE UNITED STATES GOVERNMENT, DSCA (LESSOR)
                            AND THE GOVERNMENT OF BANDARIA (LESSEE)
I. This Lease Agreement authorizes the use of U.S. Government property identified herein:
                                                                                                  Rental Charge
                                                                  Replacement Costs               (Including
   Item                                             Line                                          Depreciation)
   Nbr     Description                       Qty    Duration      Unit Value      Total           Per Month
   001     AGM-65-G Missile                  1      24            $1,500,000.00   $1,500,000.00   $9,469.70
           Navigational System Test
           Set
           1234-01-567-9810
           Total Value                                                            $1,500,000.00   $9,469.70
II. Rental Payment
            Payment Period                   Date Due                              Amount Due
            Initial Payment                  Due upon signature                    $56,820
            3rd Qtr FY 2004                  15 Mar 2004                           $28,410
            4th Qtr FY 2004                  15 Jun 2004                           $28,410
            1st Qtr FY 2005                  15 Sep 2004                           $28,410
            2nd Qtr FY 2005                  15 Dec 2004                           $28,410
            3rd Qtr FY 2005                  15 Mar 2005                           $28,410
            4th Qtr FY 2005                  15 Jun 2005                           $28,403
            Total Rental                                                           $227,273

  Signed Copy Distribution:
  1. Upon acceptance, the Lessee Government should return one signed copy of this lease to Defense Finance and
  Accounting Service - Indianapolis ATTN: Security Assistance Accounting, DFAS-JAX/IN 8899 E. 56th Street
  Indianapolis, IN 46249-0230. Simultaneously, wire transfer of the initial deposit or amount due with acceptance
  of this lease document (if required) should be made to ABA# 021030004, U.S. Treasury NYC, Agency Location
  Code: 00003801, Beneficiary: DFAS-JAX/IN Agency, showing "Payment from Bandaria for BN-Q-ZAA", or
  check for the initial deposit, made payable to the US Treasury, mailed to DFAS, 3801 Center Collections DFAS-
  JAX/IN, P.O. Box 269490, Indianapolis, IN 46226-9490, showing "Payment from Bandaria for BN-Q-ZAA.
  Wire transfer is preferred.
2. One signed copy should be returned to the Defense Security Cooperation Agency, ATTN: DBO/CFM. 201 12th
Street, Suite 303, Arlington, VA 22202-4306.
III. Related FMS Case Designator: BN-Q-BMB
                                                                                                      BN-Q-ZAA B
                                                                                                    Page 6 of 6 pages



                                                            543                                        CHAPTER 11
                                                                                    DoD 5105.38-M, October 3, 2003



                                    Figure C11.F13. Lease Determination

                                                DETERMINATION
Regarding the Lease of [insert Defense Articles]
To the Government of Bandaria
Pursuant to Chapter 6 of the Arms Export Control Act
[Lease Designator]
I hereby determine that [insert defense article] (and if applicable -- all associated nonexpendable support equipment,
including, but not limited to, tools, ground support equipment, test equipment and publications) are not for the time
needed for public use.
I further determine that there are compelling foreign policy and national security reasons for providing such Defense
Articles to [insert Country or International Organization] on a lease basis rather than on a sales basis under the Arms
Export Control Act.


  ___________________________________________                 ___________________________________________
 Date                                                        Director
                                                             Defense Security Cooperation Agency
 Concur:____________________________________
 DoS (PM)

               Figure C11.F14. Congressional Notification Information Memorandum

MEMORANDUM FOR: PRINCIPAL DIRECTOR, PROGRAMS DIRECTORATE, DSCA
SUBJECT: Certification to Congress of a Lease Under the Authority of the AECA, Chapter 6;
Lease [insert Lease Designator]
The following information is provided in connection with the reporting requirement of the AECA, section 62(a).
    a. Country or International Organization: [insert proposed Lessee]
    b. Implementing Agency: [insert proposed Lessor]
    c. Total Value Replacement Costs (must be same as Schedule A of the Lease Agreement):
    d. Type and Quantity of Equipment (segregate the MDE, indicating value):
    e. Security Classification of the Lease: (if the lease is classified, attach justification. Mark each paragraph
    with the appropriate security classification level in accordance with classification guidelines and identify the
    classifying authority and declassification date.)
    f. Security Classification of Equipment to be Leased:
    g. This lease contains support equipment that includes MTCR controlled items.
    Yes ___ No ___
    If yes, a list of possible MTCR controlled items was sent to DSCA on [insert date] and a copy is attached.
    The equipment has been checked by a qualified reviewer and is MTCR compliant. Yes ___ No ___
    h. Duration of Lease:
    i. Summary of Lease Terms (to include any special conditions):
    j. Total Rental Value (must be same as Schedule A of the Lease Agreement):
    k. Activity of the DoD Component Responsible for Administering Lease:
    l. Estimated Date Lease and Determination will be provided to DSCA:
    m. Justification (to include reason(s) why defense article(s) is/are being leased rather than sold under FMS):
         (1)
         (2)
    n. Action Officer’s name, office, and complete telephone number.



                                                           544                                          CHAPTER 11
                                                                                       DoD 5105.38-M, October 3, 2003


                         Figure C11.F15. AECA, Section 62(a) Report to Congress

                                    Transmittal No. [insert number] -- [insert year]
                Notice of Proposed Lease Pursuant to Section 62(a) of the Arms Export Control Act
    (i)         - Prospective Lessee:
    (ii)        Description of Articles Provided: [insert type and quantity]
            Total Estimated Value: [insert replacement cost]
            Terms and Duration of Lease: [insert period of Lease/Total Rental/Special Conditions]
    (iii)       Justification: [insert explanation/reasons why defense article is being leased rather than sold]

                                     Figure C11.F16. Certificate of Delivery

                                                  Certificate of Delivery
Pursuant to the provisions of the Lease Agreement executed [insert date] between our respective Governments, the
undersigned as the authorized representative of the
                                             Government of [insert purchaser]


accepts the below described [insert defense articles] together with its on board equipment from
                                __________[insert authorized representative]__________
authorized representative of the United States [insert DoD Component]



             Item                              Nomenclature                                      Quantity



_____________
Date

     ____________________________                                ______________________________

     U.S. Representative                                         Government of ______[insert purchaser]______

                                                                 Representative



     Recommended distribution:                                       Original to:       MILDEP JAG

                                                                     Copies to:         DSCA

                                                                                        MILDEP SA Activity

                                                                                        SCO

                                                                                        DFAS Indianapolis




                                                               545                                          CHAPTER 11
                                                                                    DoD 5105.38-M, October 3, 2003



                               Figure C11.F17. Sample Lease Amendment

                              Lines and data are included for illustration purposes only.

                                     AMENDMENT NUMBER 1 TO
                              LEASE OF MAVERICK SUPPORT EQUIPMENT
                                            BETWEEN
                                 THE UNITED STATES GOVERNMENT
                                              AND
                                  THE GOVERNMENT OF BANDARIA
                                            BN-Q-ZAA
WHEREAS, the United States Government and the Government of Bandaria signed a lease agreement dated 16 May
2004 for twenty four (24) months for the lease of AGM-65-G Missile Navigational System Test Set.
WHEREAS, extends the lease period from twenty four months to thirty six months.
NOW THEREFORE, The parties do mutually agree as follows:
1. Other provisions, terms, and conditions of the original lease remain unchanged
IN WITNESS WHEREOF, Each of the parties has executed this lease as of the day and year first above written,
unless otherwise agreed under terms of this lease.


         THE GOVERNMENT OF BANDARIA                              THE UNITED STATES GOVERNMENT
       BY: _______________________________                       BY: _______________________________
       ___________________________________                       ___________________________________
                      (Typed Name)                                              (Typed Name)
       ___________________________________                       ___________________________________
                          (Title)                                                   (Title)
       ___________________________________                       ___________________________________
                          (Date)                                                    (Date)
                                                                          COUNTERSIGNATURE
                                                                 BY: _______________________________
                                                                 ___________________________________
                                                                                (Typed Name)
                                                                 ___________________________________
                                                                                    (Title)
                                                                 ___________________________________
                                                                                    (Date)

                                                                                                   BN-Q-ZAA A1
                                                                                                  Page 1 of 2 pages




                                                          546                                        CHAPTER 11
                                                                                      DoD 5105.38-M, October 3, 2003



                           Figure C11.F17. Sample Lease Amendment (continued)

                               Lines and data are included for illustration purposes only.

                                            SCHEDULE A
                                   TO LEASE AGREEMENT BETWEEN
                            THE UNITED STATES GOVERNMENT, DSCA (LESSOR)
                             AND THE GOVERNMENT OF BANDARIA (LESSEE)
I. This Lease Agreement authorizes the use of U.S. Government property identified herein:
                                                                                             Rental Charge
                                                           Replacement Costs                 (Including
         Item                                  Line                                          Depreciation)
         Nbr     Description            Qty    Duration    Unit Value        Total           Per Month
         001     AGM-65-G Missile       1      36          $1,500,000.00     $1,500,000.00   $8,680.56
                 Navigational System
                 Test Set
                 1234-01-567-9810
                 Total Value                               $1,500,000.00     $1,500,000.00   $8,680.56/month
II. Rental Payment
             Payment Period                   Date Due                         Amount Due
             Lease Payments to Date                                            $56,820
             Amount Received from             $56,820
             Purchaser
             Initial Payment                  Due upon signature               $52,640
             4th Qtr FY 2004                  15 Jun 2004                      $22,560
             1st Qtr FY 2005                  15 Sep 2004                      $22,560
             2nd Qtr FY 2005                  15 Dec 2004                      $22,560
             3rd Qtr FY 2005                  15 Mar 2005                      $22,560
             4th Qtr FY 2005                  15 Jun 2005                      $22,560
             1st Qtr FY 2006                  15 Sep 2005                      $22,560
             2nd Qtr FY 2006                  15 Dec 2005                      $22,560
             3rd Qtr FY 2006                  15 Mar 2006                      $22,560
             4th Qtr FY 2006                  15 Jun 2006                      $22,560
             Total Rental                                                      $312,501
  Signed Copy Distribution:
  1. Upon acceptance, the Lessee Government should return one signed copy of this lease to Defense Finance and
  Accounting Service - Indianapolis ATTN: Security Assistance Accounting, DFAS-JAX/IN 8899 E. 56th Street
  Indianapolis, IN 46249-0230. Simultaneously, wire transfer of the initial deposit or amount due with acceptance of this
  lease document (if required) should be made to ABA# 021030004, U.S. Treasury NYC, Agency Location Code:
  00003801, Beneficiary: DFAS-JAX/IN Agency, showing "Payment from Bandaria for BN-Q-ZAA", or check for the
  initial deposit, made payable to the US Treasury, mailed to DFAS, 3801 Center Collections DFAS-JAX/IN, P.O. Box
  269490, Indianapolis, IN 46226-9490, showing "Payment from Bandaria for BN-Q-ZAA. Wire transfer is preferred.
  2. One signed copy should be returned to the Defense Security Cooperation Agency, ATTN: DBO/CFM. 201 12th
  Street, Suite 303, Arlington, VA 22202-4306.
III. Related FMS Case Designator: BN-Q-BMB
                                                                                                         BN-Q-ZAA A1
                                                                                                        Page 2 of 2 pages




                                                             547                                        CHAPTER 11
                                                                               DoD 5105.38-M, October 3, 2003



C11.11. LOANS OF DEFENSE ARTICLES
Under AECA, section 65 (reference (c)), the Department of Defense may lend materiel, supplies,
and equipment to NATO and major non-NATO allies for research and development purposes.
Loans that support cooperative research, development, test, and evaluation (RDT&E) programs,
strengthen the security of the United States and its allies by promoting standardization,
interchangeability, and interoperability of allied defense equipment. Table C11.T19. summarizes
the loan program legal references.
                             Table C11.T19. Loan Legislation Summary

               Legislation                                           Subject

    AECA, Section 65 (reference (c))   Authority, limitations, and terms of loans

                                       General authority for the President to furnish military assistance
    FAA, Part II, Chapter 2, Section   Authority to make loans under FAA, section 503 does not exist at
    503 (reference (b))                this time. See FAA, Section 503 for information on the general
                                       authority, terms and conditions for making loans under this section.

    C11.11.1. Who May Receive Loans? Under AECA, section 65 (reference (c)), the Secretary
of Defense may loan materiel, supplies, or equipment to NATO or major non-NATO allies only
to carry out cooperative RDT&E programs.
    C11.11.2. What May Be Loaned? The materiel, supplies, or equipment loaned may be
expended or consumed without reimbursement if the Secretary of Defense determines that the
success of the effort depends on expenditure or consumption and approves of it. Secretary of
Defense may not loan strategic and critical materiel if, at the time the loan is to be made, the
quantity of the materiel in the National Defense Stockpile is less than the quantity of such
materiel to be stockpiled, as determined by the President under 50 U.S.C. 98b (reference (cw))
(section 3 of the Strategic and Critical Materials Stock Piling Act).
    C11.11.3. Loan Agreements Conditions. AECA, section 65 (reference (c)) loans must
comply with the Deputy Secretary of Defense memo of November 27, 1990, which delegates the
authority to make, accept, and administer such loans (or gifts) to the DoD Components
(MILDEPs and/or Defense Agencies) in coordination with the Under Secretary of Defense for
Acquisition, Technology, and Logistics (USD(AT&L)). Each loan or gift transaction under this
section shall be recorded in a written agreement between the Secretary of Defense and the
country. Table C11.T20. summarizes conditions governing these agreements.




                                                     548                                         CHAPTER 11
                                                                               DoD 5105.38-M, October 3, 2003


                          Table C11.T20. Loan Agreement Conditions
                                        Loan Agreement Conditions
1    The Assistant Secretary/Deputy Agency Director level or higher must sign the written agreement.
2    Mutual benefits of the loan (or gift) must be shown in supporting documentation.
     Each Implementing Agency shall maintain a single repository for agreements and documents and provide
3
     a signed copy of each agreement to USD(AT&L).
4    Implementing Agencies are responsible for any funding required for loans.
     Implementing Agencies must provide appropriate legal, fiscal, and industrial base factors analysis and
5
     security plans for each agreement, as specified in DoD Directive 5530.3.
     Implementing Agencies must provide 15 days advance notification to the Office of the Secretary of
6    Defense (OSD), through USD(AT&L), before the loan agreement is executed. Advance notification must
     include the appropriate legal, fiscal, and industrial base factors analysis and security plans.
     Implementing Agencies must obtain appropriate security and technology transfer clearances for each loan
7
     (if offices responsible for those clearance so require).
     Transfers of materiel, supplies, and equipment under this authority are based on the principle of
8
     reciprocity, although item-for-item exchanges are not expected or required.
     The existence of this authority in no way affects the ability to use AECA, section 61 (reference (c)) leases
9
     for cooperative research and development purposes.
     AECA, section 65 (reference (c)) does not provide authority for the exchange of information beyond basic
     operational and simple maintenance for test purposes. Accordingly, any exchange of additional
     information related to an AECA, section 65 loan or gift may only take place pursuant to an approved test
10
     and evaluation or Data Exchange Agreement, Information Exchange Project, a cooperative research and
     development agreement, or coproduction agreement approved in accordance with DoD Directive 5530.3
     (reference (aa)).
     If required, USD(AT&L) (after coordination with USD(P) and DoD General Counsel) consults with the
11
     DoC for an assessment of U.S. industrial base impact and U.S. industry's international trade position.
     The loan agreement shall not require either party to provide materiel, supplies, or equipment that would
12   impair its own priorities, requirements, or commitments, or would otherwise be inconsistent with its
     national laws or regulations or other international agreements.
     The loan agreement describes how the type and quantity of materiel, supplies, or equipment meets the
13
     objectives of the cooperative RDT&E program.
     The loan agreement sets out the intellectual property rights applicable to the transfer and use of materiel,
14   supplies, and equipment and the results of the research, development, test, and evaluation conducted with
     the materiel, supplies, and equipment.




                                                      549                                          CHAPTER 11
                                                                                   DoD 5105.38-M, October 3, 2003


                                            Loan Agreement Conditions
         Loan agreements shall include the following terms/conditions:
         The materiel, supplies, and equipment shall remain the property of the providing party.
         Classified information or materiel shall be protected in accordance with applicable security agreements in
         force.
         The receiving party shall use the items only to meet the RDT&E objectives specified in the agreement.
         The receiving party shall maintain materiel, supplies, and equipment in good order, repair, and operable
         condition and return the items in operable condition and in as good condition as when received, normal
 15      wear and tear excepted, unless the providing party agrees that the loaned materiel, supplies, or equipment
         may be expended or otherwise consumed in connection with the RDT&E programs without
         reimbursement to the providing party.
         The receiving party shall not transfer materiel, supplies, equipment, or information to a third party without
         the prior consent of the providing party.
         Subject to the limitations of national disclosure policies, the receiving party shall submit (without charge)
         a report of its use of the materiel, supplies, and equipment to the providing party.
         Each party agrees not to assert a claim against the other for injury, loss, or damage resulting from the use
         of the materiel, supplies, or equipment loaned by the other party.

   C11.11.4. Loan Agreement Process. Table C11.T21. summarizes the Loan Agreement
process.
                                Table C11.T21. Loan Agreement Process

           Step                                                      Action

             1             NATO or a major non-NATO ally requests or makes a loan (or gift) of materiel,
      Request for Loan     supplies, or equipment for RDT&E purposes from/to a DoD Component.

            2
       Implementing        The DoD Component develops the agreement and supporting documentation in
      Agency Prepares      accordance with the legal and policy provisions.
        Agreement
             3
                           The DoD Component provides 15 days advance notification to OSD, through
         Advance           USD(AT&L) before loan execution.
        Notification

                           USD(AT&L) coordinates each loan with USD(P) and DoD General Counsel. If
            4              required, USD(AT&L) consults with the DoC for the U.S. industrial base impact
      Loan Agreement       assessment and the international trade position of U.S. industry. Such consultation is
       Coordination        conducted by USD(AT&L) after coordination with USD(P), USD(C), DoD General
                           Counsel, DSCA and the other MILDEPs/Defense Agencies (as required).

                           Upon OSD notification completion and barring non-concurrence, the Assistant
             5
                           Secretary/Deputy Agency Director level (or higher) signs the loan agreement.
      Signature of the
                           The receiving party signs the loan agreement and the Implementing Agency distributes
      Loan Agreement
                           copies to USD(AT&L) and the loan repository.

             6
      Loan Agreement       The loan is executed and monitored by the Implementing Agency.
         Execution

C11.12. MILITARY ASSISTANCE PROGRAM (MAP)


                                                          550                                          CHAPTER 11
                                                                              DoD 5105.38-M, October 3, 2003


    C11.12.1. Definition and Purpose. Prior to FY 1982, defense articles and services provided
to allied Governments or international organizations by grant aid were administered through
MAP. MAP procedures are different from those used for sales of defense articles and services.
Since FY 1982, grant funds are part of the Foreign Military Financing (FMF) program and are
not provided under MAP. There are still open FMS cases that use “MAP” or “MAP Merger”
funds. The policy and/or procedures in this section apply to those cases. Table C11.T22. lists
the legal references for MAP.
            Table C11.T22. Military Assistance Program (MAP) Legislation Summary

                Legislation                                              Subject
                                          Restricts off shore procurement under FMS cases funded with
 AECA, Section 42(c) (reference (c))
                                          merged MAP funds.
                                          Authorizes the transfer of MAP funds to the FMS Trust Fund for
                                          merger with country trust fund deposits. Requires funds may be
 FAA, Section 503(a)(3) (reference (b))   used only for payment on obligations of the recipient country for
                                          purchases from the USG under AECA, sections 21 and 22 (reference
                                          (c)).
                                          Places restrictions on recipients use. Executive Order No. 12163
 FAA, Section 505(a) (reference (b))
                                          delegates some responsibilities.
                                          Requires net proceeds of sales received by a country in disposing of
                                          articles provided under this program to be paid to the USG.
 FAA, Section 505(f) (reference (b))
                                          Authority to grant waivers of return of net proceeds for articles
                                          delivered prior to 1985 has been delegated to the Secretary of State.
 FAA Section 620(q) (reference (b))       Sanctions
 Brooke Amendment                         Limitations on assistance to countries in default

    C11.12.2. What CAN Be Purchased Using MAP Funds? MAP funds are to be used solely
for purchases from the USG made under the AECA (reference (c)). The funds are used to:
finance portions of Letters of Offer and Acceptance (LOAs) that specify MAP funding; liquidate
arrearages of 90 days or more on purchaser DD Form 645 FMS Billing Statements (only at the
specific direction of Defense Security Cooperation Agency (DSCA) (Business Operations
Directorate)); or pay for amounts due on DD Form 645 FMS Billing Statements (only at the
specific direction of DSCA (Business Operations Directorate)).
    C11.12.3. What CANNOT Be Purchased Using MAP Funds? MAP funds may not be used
for funding direct commercial purchases, or financing interest or repayments of principal or
guaranty fees with respect to Federal Financing Bank (FFB) loans.
    C11.12.4. MAP Financing. MAP funds must be obligated within the period of availability
prescribed in the annual appropriations act or the Continuing Resolution Authority.
     C11.12.5. MAP Pricing. Chapter 9 provides detailed guidance on pricing LOAs. FAA,
section 503(a) (reference (c)) was amended to eliminate the cost of military pay and entitlements
if the case is totally financed by MAP. Effective October 1, 1985, services provided under
AECA, sections 21, 22, or 29 (reference (c)) are priced to exclude military pay and entitlements
(including retired pay accrual) for those cases citing MAP funds as the exclusive method of
funding on the LOA. This pricing applies when services are performed regardless of the date of
the LOA. Any subsequent Amendment or Modification to reduce the MAP method of funding


                                                      551                                        CHAPTER 11
                                                                       DoD 5105.38-M, October 3, 2003


below 100 percent of the case value must be re-priced to add military pay and entitlements to the
entire case. This guidance does not apply to FY 1981 and prior MAP programs, to those general
costs funds programmed in FY 1982 and subsequent years which are intended for the close-out
of those programs, or to emergency drawdowns authorized by FAA, section 506(a) (reference
(b)). FAA, section 506 (reference (b)) special authority implementing procedures are provided
in the Drawdown section of this chapter (section C11.4).
    C11.12.6. Title Transfer of MAP Items. Title transfer for items transferred under the FAA is
the same as for items transferred under the AECA (reference (c)). See LOA Standard Terms and
Conditions (Chapter 5, Figure C5.F3.). Reversionary title rights do not accrue to the United
States on any defense article sold under FMS procedures even when merger funds have been
used to finance the purchase in whole or in part. Accordingly, recipient countries are not
required (as they may be under FY 1981 and prior year MAP as well as FAA, section 516
(reference (b)) (or its predecessor sections)) to return the article to the United States when the
article is no longer needed.
    C11.12.7. Third Party Transfers of MAP Items. The same restrictions on transfers to a third
party apply as apply for defense articles and services sold under FMS. See Chapter 8 for more
information.
   C11.12.8. Sanctions on MAP Recipients. See Chapter 6 for information on the impact of
suspensions and sanctions on MAP recipients.
    C11.12.9. Use and Disposal of MAP Materiel. This section applies to materiel furnished
under: the FAA of 1961, as amended, (reference (b)) (including materiel furnished under MAP
orders prior to FY 1982); FAA, section 506(a) (reference (b)) emergency drawdown authority
and similar grant DoD drawdown authorities; and FAA, sections 516, 517, 518, or 519 (reference
(b)). It does not apply to materiel purchased as a result of transfer of MAP funds to the FMS
trust fund.
        C11.12.9.1. End Use of MAP-Provided Articles and/or Services. MAP recipients must
use articles and/or services provided under this program only for the purposes for which they
were furnished as identified in FAA, section 502 (reference (b)); agree to return the materiel to
the USG without charge when no longer needed for the purposes for which furnished; and agree
not to transfer such materiel to anyone not an officer, employee, or agent of the recipient’s
Government. DSCA, the Combatant Command, or the SCO do NOT have the authority to
consent on behalf of the President to waive these requirements. The authority to approve
retransfer, change the end-use, or otherwise dispose of MAP items has been delegated to the
DoS. Controlled use of components (cannibalization) is an authorized use for these items.
        C11.12.9.2. Definition of Disposal. Disposal constitutes a change in end-use altering
disposition so the foreign holder is no longer responsible for the item. This can occur through
demilitarization or, for items not requiring demilitarization, through fair wear and tear or other
destruction and qualified technical inspection that verifies the item is unserviceable and non-
repairable. It can also include transfer, with military capabilities retained, to other authorized
recipients.




                                                  552                                   CHAPTER 11
                                                                                  DoD 5105.38-M, October 3, 2003


         C11.12.9.3. Proceeds from Disposal of MAP Items. FAA, section 505(f) (reference (b))
requires net proceeds from MAP disposal to be paid to the USG. In the case of items that were
delivered prior to 1985, the President may waive the requirement that such net proceeds be paid
to the USG if he or she determines that to do so is in the national interest of the United States.
This waiver authority has been delegated to the Secretary of State. FAA, section 505(f)
(reference (b)) applies to disposals of MAP origin defense articles by countries that were the
recipients of grant aid materiel after July 1, 1974. An agreement under FAA, section 505(f) that
constitutes a condition of eligibility for recipients of grant defense articles programmed in FY
1975 and subsequently, was concluded with those countries. A FAA, section 505(f) agreement
is not legally required for countries where no grant defense articles were programmed after June
30, 1974. U.S. policy requires (unless contrary to an agreement in force on June 30, 1974) a
recipient country commitment to return to USG the net proceeds of sale whenever country
disposal of MAP property is requested. In accordance with FAA, section 605(d) (reference (b)),
these funds shall be credited to the respective appropriation, fund or account used to procure
such defense articles or to the appropriation, fund, or account currently available for the same
general purposes. Any net proceeds from disposal shall be reimbursed in U.S. dollars except
where Government-to-Government arrangements, with the DoS representing the USG, specify
otherwise. See Chapter 8, Table C8.T6., for an explanation of the calculation of net proceeds.
    C11.12.10. MAP Accountability and Disposal Process. Chapters 5 and 6 provide
information on LOAs and deliveries of articles and/or services to purchasers. Those procedures
also apply to MAP articles and/or services. Table C11.T23. summarizes the unique MAP
accountability and disposal processes that occur after MAP items have been delivered.
                  Table C11.T23. MAP Accountability and Disposal Processes
      Step                                                     Action
       1          Each SCO works with the country to ensure that a process exists for accountability, including
   Establish      technical inspection and disposal, of U.S.-origin defense articles. The SCO ensures these
 Accountability   processes specifically identify aircraft, ships, radars, armored vehicles, general purpose
 Processes In-    vehicles, artillery, mortars, and missiles, including non-consumable and/or reparable
   Country        components of those items, that were acquired under the FAA of 1961, as amended.

       2          SCOs monitor the presence and use of U.S.-origin equipment as a matter of routine while
                  performing other duties. Any suspected unauthorized end-use must be reported to DSCA
    End-Use       (Operations and Programs Directorates) and the DoS with an information copy to the
   Monitoring     Combatant Command.
       3          SCOs should encourage the country to declare MAP materiel excess when it is no longer
     Excess       needed and before items deteriorate. Items that are redistributed to defense forces within the
 Determinations   country are not excess under this section.
       4          When MAP materiel is excess, the SCO determines its condition based on total or sample
   Determine      inspection, as appropriate, by qualified U.S. personnel. When this is not feasible, classification
  Condition of    by foreign Government authorities may be accepted. Disposal condition codes in DoD
  Excess Items    4160.21-M (reference (cx)) shall be used.




                                                         553                                          CHAPTER 11
                                                                                DoD 5105.38-M, October 3, 2003


    Step                                                      Action
                 SCOs report excess MAP items to the managing Implementing Agency (with an information
                 copy to the Combatant Command and DSCA (Programs Directorate)). Items must meet the
                 following criteria to be included on the report:
                 Have a line item acquisition value of $50,000 or more.
                 In disposal Condition Codes 1 and 2 (unused-good and fair), 4 and 5 (used-good and fair), and 7
                 and 8 (repairs required-good and fair).
                 Are not obsolete. Unless it is believed that markets exist in other countries, “obsolete” may be
                 assumed if items are no longer in DoD inventories and are at least 30 years old or, if this cannot
      5          be determined, have been in-country for at least 20 years.
Preparation of   These screening reports should show:
  Screening      Item origin (e.g., “Transferred to country under MAP, January 1981”)
   Reports       Item description
                 NSN or part number
                 Quantity
                 Condition
                 Acquisition and current value (estimated if not available)
                 SCO recommendations for disposition
                 Items not meeting the screening criteria above and those not redistributed as a result of
                 MILDEP/defense agency screening should be disposed of through Department of Defense or
                 DoS.
        6        Implementing Agencies review SCO-prepared screening results and advise whether the items
 Implementing    should be re-distributed or disposed of. Implementing Agencies provide any additional
Agency Review    guidance required for reporting or redistributing excess MAP, including non-standard, items
  of Screening   under their cognizance.
                 MAP-provided items may be disposed of or retransferred through a DRMO, under the AECA
                 (reference (c)) (via an FMS LOA) or the Federal Property and Administrative Services Act of
                 1949. MAP-provided equipment is not eligible for redistribution as EDA. Disposal, via sale, of
      7          undemilitarized Category I USML items may be made subject to proper demilitarization or
  Disposal       through an LOA.
Determination    If item disposal is through non-DoD channels or transfer to third parties, go to Step #8.
                 If item disposal is through a DRMO or DoD channels (e.g., AECA FMS procedures), go to Step
                 #10.




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     Step                                                    Action
                 Chapter 8, section C8.7. provides guidance on Third Party Transfer requirements. MAP
                 recipients request Third Party Transfers from the DoS. The request shall include the following
                 information:
                 The foreign designation or description of the item, including the name, class, identification
                 number, or other pertinent descriptive information if a vessel.
                 Former U.S. designation of equipment, including the name, class, identification number, or
                 other pertinent descriptive information if a vessel.
      8          Date of acquisition by the United States and original acquisition cost.
Request DoS      Date and means of acquisition of equipment by the host nation and value of equipment at that
Approval for     time. This should be based on records if possible. If records are unavailable, best estimates
Disposal or      should be provided and described as such.
 Third Party     Item condition, using disposal condition codes as the guide; e.g., “Code S (scrap)-has no value
  Transfer       except basic materiel content (destroyed in crash)” or “Code 5 (used, fair)-usable without
                 repairs but somewhat worn or deteriorated and may soon require repairs.”
                 Current estimated value, normally based on expected disposal method; e.g., scrap value or third
                 party sale with capability retained.
                 Proposed means of disposal (e.g., sale as scrap; sale or donation, following demilitarization if
                 applicable, to third party; sale to third country).
                 If the items were granted, whether retention of funds by the host nation is requested and
                 whether the request is supported by the SCO.
                 The DoS reviews all Third Party Transfer requests and determines whether they will be
     9           approved. The DoS also determines whether a waiver can be granted to allow net proceeds to
DoS Review/      be retained by the recipient country.
Approval of      If the DoS approves the Third Party Transfer request and items are being transferred to another
  Transfer       country or other third party, go to Step #11.
 Requests        If the DoS does not approve the Third Party Transfer request, recipient country must find other
                 means to dispose of the items.
                 When items are disposed of through DoD channels, DoS clearance is not required. This applies
                 to items turned over to DRMOs for disposal or to in-country DRMO-supervised disposal.
                 DRMO does NOT have authority to authorize countries to dispose of articles themselves.
                 Speed and assurance that proper disposal procedures are followed are principal reasons to
                 emphasize disposal through a DRMO. This includes instances where the holding country
                 disposes of items based on arrangements with DRMS, DRMS regional offices, DRMOs, or
       10        representatives of those entities such as disposal assistance teams, in conformity with DoD
                 disposal standards and under AECA (reference (c)) or DoDD 2030.8 (reference (cy)).
    Disposal
through DRMS     Condition Code S (scrap) consumable items not requiring demilitarization or other special
 or Other DoD    controls are no longer defense articles and may be disposed of through DoD facilities without
   Channels      further U.S. approval.
                 LOAs selling MAP items through DRMS (i.e., not returned to U.S. inventory) must include the
                 unique notes. See Chapter 5, Table C5.T5. for exact note wording. Any LOA sale of MAP-
                 provided items shows Source of Supply Code “E.” PCH&T and/or rehabilitation costs may be
                 included on the LOA as appropriate.
                 DoD may use items not taken to fill Security Assistance requirements.
                 Go to Step #12.
     11          Upon approval by the DoS, the MAP recipient may transfer the items to the third party in
 Disposal to a   accordance with instructions provided by the USG.
 Third Party     Go to Step #12




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      Step                                                   Action
       12
                 Net proceeds resulting from the item disposal must be returned to the USG unless a waiver has
  Net Proceeds   been granted by the DoS. See Chapter 8, Table C8.T6. for an explanation of the calculation of
  Returned to    net proceeds.
      USG
      13         SCOs in countries receiving or redistributing MAP property advise the appropriate MILDEP or
  Update MAP     agency when transfer of articles has been completed, ensure that due-ins for items received are
    Records      cancelled, and submit appropriate program change data to DSCA.

C11.13. SECURITY ASSISTANCE TEAMS
   C11.13.1. Definition and Purpose. A Security Assistance Team (SAT) consists of U.S.
Military, DoD civilian or contractor personnel deployed to a foreign country on temporary duty
(TDY) or permanent change of station (PCS) status under security cooperation programs. SATs
provide advice, training, technical assistance, or support.
   C11.13.2. Types of Security Assistance Teams
        C11.13.2.1. Extended Training Service Specialist (ETSS). ETSSs are DoD military and
civilian personnel normally deployed in a PCS status who are technically qualified to provide
advice, instruction, and training in the installation, operation, and maintenance of weapons,
equipment, and systems. ETSSs are attached to the SCO for operational control and
administrative and logistical support. They do not perform SCO staff duties. They are not used
for follow-on retraining or advisory roles, except in rare instances when the recipient country
cannot provide qualified personnel from its own resources or hire qualified personnel from non-
indigenous sources and the SCO recommends it is in the interest of the United States. ETSS
provided as English language instructors, supervisors, or advisors on detached duty status from
Defense Language Institute English Language Center (DLIELC) are also attached to the SCO.
The English language technical service provided by DLIELC is referred to as a Language
Training Detachment (LTD). ETSSs may be provided for periods up to 1 year under
International Military Education and Training (IMET); only DSCA (Operations, Programs, and
Strategy Directorates) can approve longer periods. ETSSs are programmed under budget generic
code N30 on the basis of person-month requirements. The program cost includes Overseas
Allowance (military or civilian).
       C11.13.2.2. Contract Field Services (CFS). CFS are civilian personnel under contract
from private industry who perform the same functions as ETSSs. CFS personnel are used only
when the Implementing Agency determines that services by DoD personnel are not practical.
Only DSCA (Programs Directorate) can approve use of CFS personnel under IMET. CFS
requirements are programmed on the basis of person-month requirements. Estimated contract
cost covers the total training service costs, including salary, transportation, and baggage, etc.
Budget generic code N30 funds CFS personnel.
       C11.13.2.3. Technical Assistance Field Team (TAFT). TAFTs are DoD personnel
deployed in a PCS status for the purpose of providing in-country technical or maintenance
support to foreign personnel on specific equipment, technology, weapons, and supporting
systems when Mobile Training Teams (MTTs) and ETSSs are not appropriate for the purpose.
TAFTs are not Security Assistance training and are not provided under IMET.



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        C11.13.2.4. Technical Assistance Team (TAT). TATs are DoD or contractor personnel
deployed in a TDY status to place into operation, maintain, or repair equipment provided under
FAA or AECA (references (b) and (c)) programs. TATs are Security Assistance services, but are
not Security Assistance training and are not provided under IMET, except in the case of the
installation of English language laboratories.
        C11.13.2.5. Mobile Training Team (MTT) and/or Mobile Education Teams (METs).
MTTs are DoD or contract personnel on temporary duty for the purpose of training foreign
personnel in the operation, maintenance, or support of weapon systems and support equipment or
for specific training requirements that are beyond in-country U.S. resources. MTTs may be
authorized for CONUS or overseas deployment when it is more practical to bring the training
capability to country personnel. This includes in-country training surveys to determine specific
country training needs; quantity requirements that are beyond the country capability to assess,
and that are associated with equipment deliveries; and assistance leading to self-sufficiency.
MTTs should be considered when: training must be accomplished quickly in response to a threat
or adverse condition affecting the security of the country; training is of relatively short duration,
must reach a large number of trainees, and entails extensive use of interpreters or language-
qualified team members; or training can be conducted only on equipment or in facilities located
in the foreign country. MTTs are not intended to provide technical assistance. MTTs are funded
under budget generic code N20. METs provide training developed primarily in response to the
Expanded-IMET program in a seminar and/or educational forum. By definition MET training is
unclassified.
            C11.13.2.5.1. IMET-Funded MTTs. A fundamental IMET objective is to reach
foreign military personnel who are likely to be influential in their services and/or countries. By
attending professional level CONUS training, the students are exposed to the American people,
their way of life, institutions, beliefs, and aspirations. This must be considered when proposing
an MTT versus CONUS training. MTTs may not be used solely for their cost benefits. Every
attempt should be made to provide MTTs through FMS rather than IMET. MTT requests under
IMET must demonstrate that an MTT is the best approach and IMET is the only available
funding option. Subsistence expenses, or per diem allowance in lieu thereof, obligated in one
fiscal year for IMET MTTs cannot be extended into the succeeding fiscal year. Therefore,
personnel on MTT duty must terminate temporary duty and return to home station prior to
September 30th unless action has been taken to reprogram the team in the new fiscal year,
subject to the 179 day restriction discussed below, receipt of Continuing Resolution Authority
(CRA) or other budget authority in the new fiscal year, and DSCA approval. Transportation
costs for round trip team travel are chargeable to the fiscal year of the start of the TDY.
          C11.13.2.5.2. MTT and/or MET Duration. MTTs and/or METs are authorized on a
temporary duty basis for up to 179 days. Requirements for assistance in excess of 179 days are
met by CONUS training of country personnel leading to an in-country capability or
programming of U.S. ETSSs.
            C11.13.2.5.3. Coordination of MTTs and METs. MTTs and METs require special
coordination and preparation with country personnel prior to team arrival. The country and SCO
must establish the team mission; availability of training equipment by type; student availability,
capability, and English Comprehension Level (ECL); training facilities; transportation;
communications; medical care; and team living arrangements.


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            C11.13.2.5.4. Programming MTTs and METs. MTT and MET programming must
include duration in weeks; number of team members; costs for overseas travel (round trip); in-
country travel; travel and living allowances; CONUS travel; baggage; and DoD civilian salaries.
Per diem allowance costs during temporary duty travel outside CONUS is computed according
to Joint Federal Travel Regulations (JFTR) (reference (as)) rates for U.S. military personnel, and
rates shown in the “Standard Regulations, Government Civilians, Foreign Areas” (published by
the DoS) for USG civilians. MTT CONUS travel costs are programmed at an estimated rate to
include commercial air transportation, baggage, and per diem. Only the Implementing Agency
can approve excess baggage. Costs of team members traveling from overseas locations are
computed using commercial air (tourist rate) transportation, per diem, and excess baggage.
Additional travel costs should be based on the JFTR and Joint Travel Regulations (JTR)
(reference (at)) and other applicable directives and regulations. When more than one MILDEP is
involved, a joint MTT is programmed using the MASL line of the MILDEP providing the most
team members. If each MILDEP provides an equal number of team members, the MTT is
programmed using the MASL line of the MILDEP counterpart to the requesting foreign country
service. All team member costs, including pre-deployment orientation or training costs, are
programmed as “unit costs” of the country program. No entries are made in the TLA data field.
Training aids (including PCH&T) are programmed separately under budget generic code N2,
description: MTT-TRNG AIDS (MASL Item-ID 309000-CONUS, 319000-O and/or S). This
program line shows the next sequential suffix of the WCN. Only training aids that cannot be
requisitioned under FMS are included under this procedure and must be approved by DSCA
(Operations and Programs Directorates).
       C11.13.2.6. Quality Assurance Team (QAT). QATs are DoD technical personnel
deployed in a TDY status to perform technical inspection, servicing, and inventory of FMS and
MAP equipment at recipient country's port of debarkation.
        C11.13.2.7. Weapons System Logistics Officers (WSLO). WSLOs are DoD personnel
normally employed in a PCS status who are technically qualified to provide advice and address
logistics management issues on a specific weapon system.
   C11.13.3. Prohibited Security Assistance Team Activities. SATs shall not engage in or
provide assistance or advice to foreign forces in a combat situation. Additionally, SATs are
prohibited from performing operational duties of any kind except as may be required in the
conduct of on-the-job training in the operation and maintenance of equipment, weapons, or
supporting systems. SATs shall not perform SCO functions or be used to augment the SCO,
except where specifically authorized by the host country in the LOA.
    C11.13.4. Security Assistance Team Command Relationships. The Chief of the U.S.
Diplomatic Mission exercises general supervision over the in-country operations and activities of
SATs through the SCO chief. The regional Combatant Commander provides necessary technical
assistance and administrative support to SCOs to facilitate the efficient and effective oversight of
SAT activities, including quality of life for personnel. The level of support provided to team
members under an FMS case shall not exceed that authorized for other in-country DoD personnel
of equivalent grade who are funded by U.S. appropriations or FMS. Oversight of SATs by
regional Combatant Commander through SCOs shall not usurp MILDEP authority in issues of
case management, contract administration, or the technical execution of the SAT mission as
described in the individual terms of reference (i.e., Letter of Offer and Acceptance).


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        C11.13.4.1. Security Cooperation Organization (SCO) Chief. The SCO chief exercises
operational oversight and administrative support over in-country SATs and is responsible for
coordinating the team's activities to ensure compatibility with other DoD elements in or directly
related to the U.S. diplomatic mission. The SCO chief ensures compliance with directives and
keeps the Combatant Commander informed of SAT activities and progress.
       C11.13.4.2. Security Cooperation Team Chief. The SAT team chief is the senior team
member and assigns duties and responsibilities to team personnel. The SAT team chief is under
the administrative and operational control of the SCO while in-country and is an integral part of
the SCO in support of the overall Security Assistance mission. The team chief is responsible to
the Implementing Agency for the accomplishment of the SAT technical and/or training mission.
SAT team chief responsibilities include, but are not limited to, the duties shown in Table
C11.T24.
                   Table C11.T24. Security Assistance Team Chief Functions
                                 Security Assistance Team Chief Functions
                                               (not inclusive)
          Assign duties to team members to ensure the team mission is accomplished within the prescribed
     1
          time frame.
          Submit request and justification of all TDYs required in support of team mission to SCO for review.
     2
          Requests for out-of country TDYs must be approved by the SCO.
          Coordinate annual request for Security Assistance team funding with SCO prior to submission to
     3
          MILDEP line manager.
          Submit requests and/or justification for Quality of Life (QOL) and/or Mission Sustainment (MS)
     4
          items, and items required to execute the team mission, to the SCO prior to purchase.
          Establish and maintain supply and/or equipment accountability records for all QOL, MS and
          mission essential property in accordance with MILDEP directives and procedures. Provide SCO
     5
          with a copy of property records listing all non-expendable, durable equipment valued at $50.00 or
          more.
          Provide SCO with access to team property for the purpose of conducting a physical inventory (at
     6
          least annually and/or prior to team chief departure from country).
          Identify problems that may impact team personnel and/or mission to the SCO and Implementing
     7
          Agency line and/or team manager.
          Send copies of receipts and vouchers to line manager organization and hold copies on open action
     8
          files until cleared through accounting and finance channels.

        C11.13.4.3. Security Cooperation Organization. The SCO has responsibility for
oversight of SAT personnel and activities and identifies problems to the Implementing Agency
Case Manager for resolution. The SCO ensures fair and equitable treatment in the level and
quality of support provided to all DoD personnel in-country. SCO support of Implementing
Agency line and/or team manager includes, but is not limited to, the duties shown in Table
C11.T25.




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           Table C11.T25. SCO Functions in Support of Security Assistance Teams
                          SCO Functions in Support of Security Assistance Teams
                                             (not inclusive)
          Review residential leases to ensure quarters are appropriate for rank and dependent status of team
          members and comply with DoD and DoS standards. The SCO ensures each lease request is
          submitted to the Embassy Interagency Housing Board for approval prior to signature by the
     1
          appropriate contracting officer. If higher headquarters approval is required, ensure Embassy
          Interagency Housing Board reviews request before forwarding lease to the Implementing Agency
          case manager.
     2    Establish procedures to review all team TDYs and approve requests for out-of-country travel.
          Review SAT team chief's request for annual funding prior to submission to the Implementing
     3
          Agency line and/or team manager.
          Review SAT request for purchase of Quality of Life (QOL) and/or Mission Sustainment (MS) items
          and items required to execute the team training and/or technical assistance mission. The SCO
          provides Implementing Agency, SAT management agency, and the Combatant Commander with an
     4
          itemized listing of recommended QOL and MS articles to be included in the LOA. SCOs ensure the
          requested items are authorized in the LOA under which the team operates and that vendor
          discussions and actual purchases are made through a USG contracting office.
          Ensure team chief establishes supply and/or equipment accountability records that provide a
     5    complete audit trail from item acquisition to disposal. All non-expendable, durable property costing
          $50.00 or more is recorded on a property record.
          Periodically review team property and inventory records for accuracy. Ensure continuous in-
          country accountability is maintained by conducting a physical inventory prior to team and/or team
     6
          chief departure from country. As a minimum, physical inventories for PCS teams are conducted
          annually.
          Perform periodic reviews of team petty cash funds to ensure funds are adequately protected and cash
     7
          management is in accordance with Embassy budget and fiscal office procedures.
          Assist SAT chief to establish procedures with the Embassy for payroll support of any foreign
     8
          service employees hired to support the SAT.
          Assist Implementing Agency line manager to identify country and/or case unique management and
     9
          administrative duties in the implementing program directive.

    C11.13.5. Military Justice Jurisdiction. The Combatant Commander has general courts-
martial convening authority over all military personnel under his or her command. However,
since disciplinary action is normally administered by a commander of the same Service as the
offender, the Combatant Commander normally requests the component commander of the
member's Service, or that commander's designee, to take courts-martial jurisdiction over PCS
team personnel. The Combatant Commander reserves the right to exercise military justice
jurisdiction in those cases impacting the mission, or affecting external relations. Uniform Code
of Military Justice (UCMJ) jurisdiction over TDY team members is concurrent with their parent
organization commander and the Combatant Commander. Article 15 jurisdiction for all
personnel (both TDY and PCS) shall be exercised in accordance with Service directives.




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    C11.13.6. Quality of Life (QOL) and Mission Sustainment (MS) Items. QOL items are any
articles or services that, in the judgment of the SCO Chief and Combatant Commander, have a
positive effect on the living and and/or or working environment of the deployed SAT. MS items
are those articles and services that are essential for the successful accomplishment of the team's
mission. Factors to be considered in determining specific QOL and/or MS item requirements
should include availability of suitable entertainment, climate and/or geography, security, local
language, and recreational facilities. The SCO chief is the ultimate authority in-country for
approving expenditures for these items within published guidance and LOA limitations. QOL
and/or MS items are procured for team rather than individual use.
         C11.13.6.1. Examples of QOL Items. Examples of QOL items include, but are not
limited to: magazines (non-security assistance), athletic equipment (e.g., bats, gloves, balls,
etc.), fishing equipment, camping equipment, scuba gear, equipment repair, etc. Not included
are charges for consumables, memberships, lessons, etc. Additionally, personal entertainment
equipment, such as TVs and/or VCRs and/or DVD players and/or stereos, should only be
provided for use in dayroom-type situations when justified by unusual circumstances or when
individual team members cannot reasonably be expected to bring or acquire their own (e.g.,
extreme isolation or harsh environmental conditions, and limitations on baggage and/or personal
belongings that SAT members may bring). High cost QOL items over $500 must be approved
by the Combatant Commander and justified in the budget submission. Due to storage and repair
problems, it may be more economical to rent and/or lease authorized high-cost equipment on an
occasional basis to reduce the costs involved.
        C11.13.6.2. Examples of MS Items. Examples of MS items include, but are not limited
to: housing, dependent education, medical support (MEDEVAC), security guards, drivers,
physical conditioning equipment (e.g., aerobic equipment, weight lifting equipment, etc.),
transformers, environmental and morale leave.
        C11.13.6.3. Funding for QOL and/or MS Items. QOL items for Security Assistance-
funded teams are provided to the team by the parent MILDEP and not from Security Assistance
funds provided to the SCO (T-20) or (T-10). If MILDEP funds are inadequate to meet QOL
requirements for FMF-funded FMS SATs, then the FMF-funded FMS SAT case funds may be
used if specifically authorized in the LOA. QOL items cannot be funded under IMET but may
be provided to IMET-funded teams from in-country SAT stocks or parent MILDEP. MS items
identified by the SCO can be purchased in-country using case funds if specifically authorized in
the LOA.
        C11.13.6.4. Disposition of QOL and/or MS Items. Prior to departure from country, the
SCO and SAT chief conduct a physical inventory of QOL and MS property. The MILDEP
determines disposition of QOL items furnished by the MILDEP. The SCO determines
disposition of QOL items purchased with case funds. The SCO chief is the ultimate authority in-
country for disposition of MS items within published guidance and LOA limitations. For
continuing SAT missions, the team chief assigns the property to the follow-on team chief or
temporarily to the SCO. When the SAT mission is complete, the property is transferred to an
authorized representative of the host country or returned to the MILDEP as appropriate. Items
purchased with case funds ultimately become the property of the host country and the SCO
assigns the property to an authorized representative of the host country.



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C11.14. SPECIAL DEFENSE ACQUISITION FUND (SDAF)
    C11.14.1. Definition and Purpose. The SDAF was authorized in 1981 by enactment of
AECA, Chapter 5 (reference (c)). The Principal Deputy Assistant Secretary of Defense
(Comptroller Directorate) approved the SDAF Charter and Operation Instructions on December
30, 1982. The purpose of the SDAF program was to procure defense articles in anticipation of
sale to foreign Governments. SDAF-procured equipment was held in DoD inventory, segregated
from other DoD items. The inventory facilitated delivery of selected items of materiel in
advance of normal lead-time enabling the USG to satisfy urgent military requirements of allied
and friendly nations while avoiding diversions from U.S. Forces. AECA, section 51(a) (22
U.S.C. 2795(a)) (reference (c)) was amended in 1989 and provided that the SDAF could be used
for narcotics control purposes. As of September 30, 1995, SDAF no longer procures equipment.
All SDAF items have been purchased from inventory. This section shows how these programs
are finalized and closed.
    C11.14.2. SDAF Delivery Reports. Implementing Agencies use delivery reporting (see the
DoD 7000.14-R (reference (o)), Volume 15, Chapter 8) to report assets provided to an FMS
purchaser to DFAS Denver. The Logistics Support Charge must be excluded from the reported
delivered price. Two categories of items are reported to DFAS Denver.
        C11.14.2.1. Major Equipment. Implementing Agencies delivery report major SDAF
equipment items to DFAS Denver within 10 days of shipment to FMS purchasers. SDAF sales
are at a stabilized price, which is the current contract price or the SDAF price (depending on
which is higher).
        C11.14.2.2. Support Items. Implementing Agencies delivery report SDAF-owned
support items (sold to an FMS purchaser) to DFAS Denver. Reports are submitted to DFAS
Denver within 7 days of the inventory drop date and may contain the latest FMS price for the
sold items.
      C11.14.2.3. Delivery Codes. SDAF uses three delivery source codes as shown in Table
C11.T26.
                        Table C11.T26. SDAF Delivery Source Codes

      Delivery Code                                         Source

           SA         Sale of items originally purchased from DoD inventories.

                      Sale of items procured from contractors by the SDAF. This delivery source code
           SD
                      computes packing, crating, and handling (PC&H) cost.
                      Sale of items procured from contractors and shipped directly from the contractor to
           SE         the FMS purchaser, providing there is no requirement for any special PC&H. This
                      delivery source code does not compute PC&H cost.




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    C11.14.3. Supply Discrepancy Reports (SDRs). Chapter 6 provides detailed information on
processing SDRs against FMS cases. It is DoD policy that the appropriation credited with the
proceeds of a sale pays the SDR costs or replaces the materiel when the USG is deemed to be
liable to the FMS purchaser. Therefore, SDAF pays SDR costs on SDAF cases when applicable.
When SDAF is considered responsible for a SDR, the SDR, along with a legal opinion (when
required), must be submitted to DSCA (Business Operations Directorate) for concurrence.
  C11.14.4. SDAF LOA Closure. Chapter 6 provides information on closing FMS cases.
SDAF LOA closure involves additional reviews as follows.
       C11.14.4.1. Implementing Agency “Q” SDAF Cases. DFAS Denver informs DSCA
(Business Operations Directorate) monthly of those LOAs for which all collections have been
made, accounts are balanced, and which are ready for closure.
         C11.14.4.2. Implementing Agency “B,” “D,” “P,” or “M” Cases With SDAF Lines.
DFAS Denver is the financial manager for any FMS LOA lines on Implementing Agency LOAs
that sell SDAF assets. Closure responsibilities are accomplished as agreed between DFAS
Denver and the appropriate Implementing Agency for each SDAF LOA line. Once an LOA line
is balanced, DFAS Denver informs DSCA (Business Operations Directorate) that the line is
ready for closure and requests approval. Final closure of an LOA line is not accomplished until
DSCA (Business Operations Directorate) approves the amount of SDAF reimbursement.
   C11.14.5. Reports. DFAS Denver prepares a number of reports in accordance with DoD
accounting requirements. Defense items received from SDAF and taken into property
accountability by the Implementing Agencies are reported quarterly to DSCA (Business
Operations Directorate).
C11.15. WARSAW INITIATIVE FUND (WIF)
In January 1994, the North Atlantic Treaty Organization (NATO) launched the Partnership for
Peace (PfP) program to countries seeking cooperative military and peacekeeping relations with
NATO. Table C11.T27. identifies the core objectives for Partner countries to pursue in their
cooperation with NATO. To support PfP efforts, the United States established the Warsaw
Initiative Fund (WIF). The WIF is jointly managed by the Department of State (DoS) and
Department of Defense (DoD). The DoS portion of WIF uses Foreign Military Financing (FMF)
grants, provided according to the laws and policy governing foreign assistance. The DoD
portion of WIF uses defense-wide Operation and Maintenance (O&M) and Research and
Development (R&D) funds, provided according to the laws and policy governing these types of
funds. The following guidance applies solely to the DoD portion of WIF.




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                                  Table C11.T27. PfP Program Objectives
   #                                                     Objectives
        Implement programs consistent with decisions of NATO leaders at the Istanbul Summit (e.g. defense
  1     transformation, Global War On Terrorism (GWOT) support, Weapons of Mass Destruction (WMD)
        preparedness, & niche capabilities).
  2     Facilitate transparency in national defense planning and budgetary processes.
  3     Ensure democratic control of the armed forces.
  4     Maintain capability and readiness to contribute to operations led by the U.S. or NATO.
        Develop cooperative military relations with NATO for the purpose of joint planning, training and exercises
  5     in order to strengthen the ability of partners to undertake missions in the fields of peacekeeping, search and
        rescue, humanitarian operations, and others as may subsequently be agreed.
  6     Develop interoperability between NATO members and PfP partners.

    C11.15.1. WIF Authorities. The Department of Defense implements the WIF program at the
direction of Congress using existing statutory authorities under sections 168, 1051, and 2010 of
Title 10, United States Code and authorities governing use of Operation and Maintenance funds.
Table C11.T28. summarizes the U.S. Code WIF authorities.
                                Table C11.T28. WIF Legislation Summary
       Legislation                                                 Subject
                        Authorizes payment of expenses of military-to-military contacts and comparable activities
  10 U.S.C. 168         designed to encourage democratic orientation of defense establishments and military
  (reference (dh))      forces of other countries. Activities include traveling contact teams, military liaisons,
                        exchanges of personnel, seminars, and conferences.
                        Authorizes the payment of travel, subsistence and similar personal expenses for defense
  10 U.S.C. 1051        personnel of developing countries in connection with attendance at bilateral or regional
  (reference (bt))      conferences, seminars, or similar meetings. Attendance must be in the U.S. national
                        security interests.
                        Authorizes the payment of incremental expenses of a developing country incurred as the
                        direct result of participation in a bilateral or multilateral military exercise if the primary
  10 U.S.C. 2010        purpose is to enhance U.S. interests and the participation of the developing country is
                        necessary to achieve the fundamental goals of the exercise. Incremental expenses are
  (reference (bu))      “reasonable and proper costs of goods and services consumed by a developing country as
                        a direct result of that country participating in the exercise with the United States.” It does
                        not include items such as pay and allowances, and normal costs of a country’s personnel.

    C11.15.2. Eligibility. Developing countries that are PfP members are eligible for WIF. WIF
Program Managers should use World Bank lists of developing countries to determine which
Partners are developing countries. Current developing country Partners are: Albania, Armenia,
Azerbaijan, Belarus, Croatia, Georgia, Kazakhstan, Kyrgyz Republic, Macedonia, Moldova,
Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan.




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    C11.15.3. WIF-Supported Programs. Under existing statutory authorities, WIF can support
military exercises and an array of interoperability programs, conferences, exchanges, seminars,
and studies. WIF may be used in conjunction with other types of funding such as Cooperative
Threat Reduction (CTR), Combatant Command (COCOM) Initiative Fund (CCIF), Traditional
COCOM Activities (TCA), Official Representation Funds (ORF), Emergency, Extraordinary,
Expenses (EEE), FMF, IMET, and NATO funds.
        C11.15.3.1. Military Exercise Support. WIF can be used to pay incremental expenses for
eligible PfP partners’ participation in PfP and “in the spirit of PfP” exercises. WIF can support
partner participation in an exercise only if U.S. Forces are also participating. High priority is
placed on partner participation in exercises that support declared niche capabilities or greater
interoperability with U.S. or NATO forces. COCOMs manage exercise programs to meet theater
specific security cooperation goals.
        C11.15.3.2. Interoperability Programs. WIF can be used to pay eligible PfP Partner costs
to participate in interoperability programs such as those identified in Table C11.T29.
                             Table C11.T29. Interoperability Programs
                                       Interoperability Programs
              C4I Studies                       Regional Airspace Studies
              Logistics Exchanges               Navigational Aids Studies
              Public Affairs Exchanges          Civil Military Planning Seminars
              Legislative Affairs Exchanges     Infrastructure Assessments
              Environmental Exchanges           Defense Assessments and Studies
              Inspector General Exchanges       Defense Planning Seminars
              Comptroller Exchanges             Defense Resource Management Seminars
              Parliamentary Seminars            Partnership Information Management

        C11.15.3.3. Other Programs. WIF can be used to pay for additional outreach programs
and initiatives that may emerge to respond to guidance established by the Office of the Secretary
of Defense. The Deputy Assistant Secretary of Defense (International Security Policy, Eurasia)
will provide policy guidance on new program initiatives. New initiatives must benefit the
Department of Defense.
         C11.15.3.4. Travel By U.S. Participants. WIF is intended for PfP partners, and generally
does not pay for U.S., Allied, or non-partner expenses. U.S. Government (USG) or DoD
representatives may be funded according to law and current policy guidance when their expertise
is critical to the execution of the event.
    C11.15.4. Items Not Supported by WIF. WIF cannot be the primary source of exercise
funding and cannot be used to support U.S. participation in exercises, except as noted in
paragraph C11.15.3.4. WIF cannot pay for courses, since they are regarded as “training.” Other
sources of funds (e.g., International Military Education and Training (IMET)) should be used for
training or education where coursework is involved. WIF cannot be used to support activities
that are defined as “material assistance,” such as provision of weapon systems, equipment,
courseware, etc.



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   C11.15.5. WIF Organization Responsibilities. Table C11.T30. identifies the DoD
organizations and their responsibilities in support of the PfP Program utilizing WIF.
                        Table C11.T30. WIF Organization Responsibilities
     Organization                                           Responsibility
                        DoD lead for WIF and PfP policy
                        Determine WIF planning, prioritization, and funds distribution
                        Primary interface between country desks officers at OSD, Joint Staff, DSCA, and
                        COCOMs
                        Report WIF status and results to Congress via DoS annual report
   ASD (International
                        Provide oversight of OSD interoperability programs
    Security Policy)
                        Assess annual COCOM and Interoperability Program objectives
                        Coordinate and seek DoD Office of the General Counsel review, as necessary
                        Review/approve annual program submissions; ensure appropriations are executed by
                        DSCA
                        Maintain direct link to NATO via U.S. Delegation to NATO
                        Manage WIF program execution
                        Manage cost, schedule, and performance related to WIF program execution
                        Develop programs and activities in response to policy guidance
                        Prepare budget materials
                        Defend budget requests to USD (Comptroller); support Office of Management and
                        Budget (OMB) and Congressional inquiries
         DSCA           Determine if costs requested by activities are allocable to WIF
                        Provide funds certification
                        Allocate approved funds to WIF receiving activities
                        Issue funds to field activities
                        Quarterly provide WIF financial management and program accountability (obligations,
                        expenditures, reconciliations) to ISP Eurasia, WIF Policy Managers
                        Provide legal analysis in support of DoD Office of the General Counsel, as necessary
                        Provide administrative oversight of COCOM PfP exercise and interoperability programs
                        Plan and prioritize WIF in support of individual COCOM activities
                        Coordinate Secretary of Defense guidance and regional COCOM plans with DSCA and
                        DASD Eurasia WIF policy managers.
   Joint Staff/ COCOM
                        Coordinate with National Guard Bureau (NGB) as necessary to ensure the best use of
                        National Guard and State partner assets
                        Maintain direct link to NATO via U.S. Mission to NATO and U.S. National Military
                        Representative at Supreme Headquarters Allied Powers Europe (SHAPE)
                        Plan, prioritize, and implement PfP activities
                        Coordinate as necessary to ensure priorities are aligned with strategic plans and ASD
                        (ISP) priorities
                        Conform to DoD Financial Management Regulations, guidelines, and standard operating
                        procedures (SOP) addressing fund acceptance, disbursement, reporting, expenditures,
    Program/Activity    and fiscal year closeout. (These are available from DSCA (Business Operations
       Managers         Directorate).)
                        Provide annual and quarterly WIF fiscal summaries to DSCA and DASD Eurasia to
                        satisfy mandated Congressional reporting
                        Ensure monthly obligation and expenditure reporting is accomplished
                        Ensure WIF is implemented in accordance with published DoD and COCOM guidance



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      Organization                                            Responsibility
                         Influence strategic planning as necessary to achieve regional objectives
                         Identify performance metrics representing program successes and challenges
                         Facilitate planning and implementation of WIF within the assigned country, in
                         coordination with COCOMs and lead WIF management activity
     In-Country PfP      Implement programs in accordance with guidance provided by the requiring activity
      Coordinators       Coordinate annual requirements to COCOM and participate in short and long term
                         planning
                         Maintain fiscal transaction capability via a qualified financial tracking system
                         Fulfill the democratic principles as agreed to in the PfP Framework Document
                         Plan, prioritize, and execute PfP objectives as agreed to in the Euro-Atlantic Partner
                         Work Plan (EAPWP), Membership Action Plan (MAP), and Individual Partner Action
                         Plan (IPAP)
      PfP Recipient
                         Ensure ratification of PfP Status of Forces Agreement (SOFA)
         Nations
                         Collaborate with Partnership Coordination Center (PCC) representatives at SHAPE to
                         coordinate PfP activities and access NATO common funding as required
                         Ensure necessary in-country PfP administration and support is established and
                         maintained
                         Provide accounting support to all WIF activities
   Defense Finance and
                         Maintain official accounting records
   Accounting Service
                         Distribute monthly accounting reports

    C11.15.6. Budgeting and Financial Execution. DSCA (Business Operations Directorate)
maintains SOPs for use by the WIF program. In July of each fiscal year, MILDEPs, COCOMs,
and Regional Program Directors submit WIF budget proposals to the Deputy Assistant Secretary
of Defense (DASD) Eurasia and DSCA for projects proposed for execution in the next fiscal
year and estimates of WIF requirements for the budget years. Each proposed activity is
coordinated with the OSD desk officer, Joint Staff, and in-country teams before submission.
DASD Eurasia, in consultation with DASD Europe and NATO policy, reviews submissions and
consolidates initiatives into an annual WIF plan and estimates for the budget years. These
annual requirements are forwarded to DSCA for execution and funding on a quarterly basis. The
annual WIF plan will be adjusted throughout the year to respond to emerging requirements. The
DSCA WIF Program Director will coordinate with DSCA (Business Operations Directorate) on
quarterly financial allocations for all WIF activities. Quarterly funding requests to execute the
fiscal plan are provided to the DSCA WIF Program Director one month prior to beginning of
each quarter. Extensive DoD Planning, Programming, Budget and Execution (PPBE)
information is available via the Financial Management Regulation website
(http://www.dod.mil/comptroller/fmr).




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     C11.15.7. WIF Funding Guidelines. WIF is demand driven by PfP events that are of the
highest priority to U.S. national interests and NATO initiatives. Partner’s total funding depends
on the number of exercises and interoperability programs in which it is capable of participating.
It is imperative that country defense attachés and security cooperation officers participate in the
requirements and prioritization process. Recipients of WIF are responsible for the administrative
control of funds and record keeping. This requirement is based in law, instructions issued by
OMB and the DoD Financial Management Regulations, which contain guidelines on budget
execution. DoD WIF are one-year O&M funds that must be obligated in the year for which they
are appropriated. Each WIF activity must plan for effective execution of funding on an annual
basis. The WIF RDT&E, defense-wide funding for the PfP Information Management System
(PIMS) will be centrally managed by the DSCA WIF Program Director.
    C11.15.8. WIF Program Planning and Execution. After DASD Eurasia and the COCOMs
have approved the fiscal plan, the Program/Activity Manager manages program implementation,
maximizing in-country assets as necessary. Each manager is responsible for determining cost,
schedule, and performance associated with their program. DASD Eurasia provides policy
guidance and DSCA assumes implementation and execution responsibilities. WIF Program
Managers should contact DASD Eurasia for questions of policy, and DSCA for questions
regarding fund use. DSCA (Business Operations Directorate) provides direction concerning
budgetary, financial and contract questions.
     C11.15.9. Procurement Requirements Documentation (PRD). Each WIF receiving activity
generates and manages its own contracts to ensure timely execution of budgeted and approved
plans. DSCA (Business Operations Directorate) manages those actions where DSCA pays
directly for contracted services and support. Each activity submits the documentation required to
initiate a procurement request for services or supplies. At a minimum, 60 days prior to award
date, the contracting office requires: a Performance Work Statement (PWS); an Independent
Government Cost Estimate (IGCE); an Administrative Service Request (DD Form 1262); a
written request regarding the requirement; and, a Justification and Approval (J&A) in accordance
with FAR Part 6.302 (reference (ak)) if circumstances permit other than full and open
competition.
   C11.15.10. WIF Program Planning and Implementation Process. Table C11.T31.
summarizes the annual WIF planning and implementation process.




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                                                                              DoD 5105.38-M, October 3, 2003


      Table C11.T31. WIF Program Planning Timeframe and Implementation Process
   Steps
                                                            Actions
  (Date)
               WIF is recognized as a method to fund PfP Partner participation in exercises, and activities,
      1        exchanges, conferences, or other interoperability programs that support defense institution
               building, defense reform, achievement of greater interoperability and development of
   (June)      capabilities that support the GWOT. Details can be found in the ASD(ISP) annual plan or
               various NATO publications that outline areas of cooperation and Partnership Action Plans.
               Partners choose the events they desire participation and list them in their Individual Partner
      2
               Action Plan (IPAP).
   (June)
               Plans are reviewed by the Security Cooperation Organization (SCO), COCOM, and ASD(ISP).
      3        ASD(ISP) solicits WIF activity proposals from COCOMs, Joint Staff, MILDEPs and
   (June)      Program/Activity Managers.
     4         ASD(ISP) consolidates requirements and develops the annual DASD WIF guidance. It is then
   (July)      published for use by WIF activity managers.
    5          DSCA WIF Program Director synopsizes approved requirements to the WIF Financial
 (August)      Manager in DSCA (Business Operations Directorate) via memorandum.
               USD(C) allocates WIF funding in quarterly amounts to DSCA (Business Operations
     6         Directorate) who in turn allocates approved amounts to WIF activities in coordination with the
   (Oct)       WIF Program Director.
               Execution of exercises, exchanges, and interoperability programs commences.

     7         Program Review - normally there is at least one major program review to conduct strategic
               planning, assess performance of WIF, and communicate initiatives within the DOD and the
   (Jan)       interagency. Additional program reviews are held as required.
    8          Financial Reviews convened to assess funds obligations, expenditures, and yearly performance.
(Nov/April)

     9         Each WIF activity implements planned events and documents performance results for
               communication to the Security Assistance community. Reporting formats and distribution are
(Continuous)   managed by DSCA (Business Operations Directorate).

     10        DSCA/ASD(ISP)/Joint Staff/COCOMs monitor execution and make adjustments as required.
               New or significant revisions to annual requirements are considered “Out of Cycle” requests.
(Continuous)   The format and worksheet for requesting “Out of Cycle” WIF is provided in Figure C11.F18.

     11        ASD(ISP) will determine the viability of the “Out of Cycle” requested events/activities and
               their relative priority to overall WIF annual requirements. DSCA and the requesting activity
(Continuous)   will provide input as necessary to support recommendations.

     12        Approved “Out of Cycle” requests are implemented by the DSCA WIF Program Director via
               memo to the DSCA Financial Manager to release funding to requiring activity. These requests
(Continuous)   may require a budget offset when DSCA lacks sufficient Operation and Maintenance Funds.
    13         DSCA (Business Operations Directorate) provides monthly reports to OUSD(C) on the
 (monthly)     financial performance.

     14        DASD Eurasia drafts a chapter on WIF program accomplishments and provides to DoS for
               inclusion in the annual PfP Report to Congress. This report is a statutory requirement levied on
 (annually)    DoS by Congress.




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               Figure C11.F18. WIF “Out of Cycle” Request Letter/Worksheet Format

                                               Command Letterhead

 From:       Director, [insert Command]

 To:         Office of the Secretary of Defense, Policy

             Attn: Assistant Secretary of Defense (International Security Policy), WIF Program Managers



             Director, Defense Security Cooperation Agency

             Attn: Operations, WIF Program Director



Subject: Out of Cycle Request for Warsaw Initiative Funds to Support [insert Title]
Enclosure:        WIF Request Worksheet – [insert proposed activity and recipient country]
This memorandum requests WIF to support [insert Title], scheduled to take place on [insert date]. The following is
forwarded for your consideration.
 Event/Activity Purpose:
 Funding Required:
 Cost Breakdown and Supporting Detail:
 Explanation how event/activity supports WIF objectives:
 Project and Financial Administration POC’s:
 Proposed Budget Offset:
The point of contact for this action is [insert name, telephone number, and e-mail address].
Attachments as required




WIF “OUT OF CYCLE” WORKSHEET
Proposed Recipient: [insert country name and armed forces branch]
Activity/Event Description/Purpose:
Personnel required: [insert USG and foreign nationals]
Equipment/Materiel Requirements: [insert name and nomenclature]
Travel Requirements:
Proposed Dates of WIF activity/event: [insert month, date and year]
Detailed Justification for the event/activity: (include special circumstances why this WIF requirement must be
performed; why it is advantageous to U.S. interests to conduct the activity/event, adverse consequences to strategic
interests or schedules if not performed, etc.)
Cost of Event/Activity: [insert dollar value and supporting details]




                                                           570                                         CHAPTER 11

				
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